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An investor pays $170,000 for a mine that will produce level annual revenue for 25 years. What should the level annual revenue be (received at the end of each year) if the investor is to receive 4% annual return on the investment while recovering the prin

An investor pays $170,000 for a mine that will produce level annual revenue for 25 years. What should the level annual revenue be (received at the end of each year) if the investor is to receive 4% annual return on the investment while recovering the principal in a sinking fund earning 2.5% per year?

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Answer #1

Level annual revenue=Interest+Principal for sinking fund=Investment*return+Investment*sinking fund return/((1+sinking fund return)^t-1)=375000*4%+375000*2.5%/(1.025^23-1)
=27261.1418

answered by: ANURANJAN SARSAM
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