Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A factory costs $800,000. You reckon that it will produce an inflow after operating costs of $170,000 a year for 10 years. If the opportunity
A factory costs $800,000. You reckon that it will produce an inflow after operating costs of $170,000 a year for 10 years. If the opportunity cost of capital is 14%.
- what is the net present value of the factory?
- What will the factory be worth at the end of six years?
my concern is regarding question 2. i have the answer, but what i dont understand is, why would we put (10 years minus 6 years) for t in the PV of annuity equation. Doesnt the question want the amount for the end of six years, so why not use (6 years) instantly for t please solve on paper and explain in details why would we use 10-6 instead of 6 for t = period
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started