Questions 1.

QUESTION 1. (30 Marks) Anita purchased an industrial sewing machine at the beginning of year one for K1,000. She expects to receive at annual intervals the following receipts at the end of the following years; Year1:K400Year2:K500Year3:K600 At the end of year three she expects to sell the machine for K400 and she could receive a return of 10% in the next best investment. The present value of K1 receivable at the end of a period discounted at 10% is as for the following years; EndofYear1:EndofYear2:EndofYear3:K0.909K0.826K0.751 Calculate the ideal economic income, ignoring taxation, and working to the nearest whole kina. Your answer should show that Anita's capital is maintained throughout the period and that her income is constant