I need desperate HELP, Finance question: "Suppose a factory costs $840,000...."

iNeedMathHelpLol

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Mar 23, 2019
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Suppose a factory costs $840,000. You reckon that it will produce an inflow after operating costs of $174,000 a year for 14 years.
1. If the opportunity cost of capital is 10%, what is the net present value of the factory?
2. What will the factory be worth at the end of seven years?
 

HallsofIvy

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How much principle would you have to have so that, investing it at 10% per year, you would bring in as much money as the factory will earn?
 

Denis

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Feb 17, 2004
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You need to use the present value of an annuity formula:
p = a(1 - k) / r where k = 1 / (1 + r)^n

a = 174000
n = 14
r = .10 : assumes rate is 10% cpd. annually
p = ?

Same thing for part 2, except n = 7

Your teacher gave the class that problem and did not give the formula?
 

iNeedMathHelpLol

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Mar 23, 2019
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You need to use the present value of an annuity formula:
p = a(1 - k) / r where k = 1 / (1 + r)^n

a = 174000
n = 14
r = .10 : assumes rate is 10% cpd. annually
p = ?

Same thing for part 2, except n = 7

Your teacher gave the class that problem and did not give the formula?

Nope, can you please explain it for me? Usually if I see the answer I can reverse learn it and get it down pat.

Thanks
 

Denis

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Feb 17, 2004
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This is not a classroom; go read up:

Anyway, seems to be something wrong with the problem statement:
as far as I can tell, the given cost of $840,000 is not required.
What d'you think Halls?
 

iNeedMathHelpLol

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Denis

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Threads not deleted here.
May we ask you to come back when you find out what the
given solution is and post it: may help someone else; thank you.
 
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