A mine costs $P21M,$ and will last for $20$ years. Its plant has a salvage value of P$1$M$,$ at the end of the time. The mine will yield an equal dividend, if it is sufficient to pay interest annually at the rate $6\%$ on the original investment and to accumulate a replacement fund, invested at $4\%.$

Solution

$D=(FC)r+\frac{(RC-SV)i}{(1+i{)}^n-1}$

$FC=21M,r=6\%=0\mathrm{.}06$

$SV=1M,i=4\%=0\mathrm{.}04$