An investment of $10,000 can be made in a project that will produce five (5) uniform...
An investment of $10,000 can be made in a project that will produce five (5) uniform annual revenues and a market value (salvage) value of $2,000. The company is willing to accept any project that will earn 10% per year or more, on all the invested capital. Compute the annuity that will make this investment worthwhile.
$2,000
$1,600
$2,310
$2,638
Homework Answers
Let annuity value be A
AW=-10000(A/P,10%,5)+A+2000(A/F,10%,5)
For the investment to be worthwhile
Annuity = 10000(A/P,10%,5)-2000(A/F,10%,5)
=10000(0.263797)-2000(0.163797)
=2637.97-327.594
=2310.37
Option(C)
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