A machine has been purchased and installed at a total cost of P18,000.00. The machine will be retired at the end of 5 years, at which time it is expected to have a scrap value of P2,000.00 based on current prices. The machine will then be replaced with an exact duplicate. The company plans to establish a reserve fund to accumulate the capital needed to replace the machine. If an average annual rate of inflation of 3% is anticipated, how much capital must be accumulated?
A machine has been purchased and installed at a total cost of P18,000.00. The machine will be retired at the end of 5 years, at which time it is expected to have a scrap value of P2,000.00 based on current prices. The machine will then be replaced with an exact duplicate. The company plans to establish a reserve fund to accumulate the capital needed to replace the machine. If an average annual rate of inflation of 3% is anticipated, how much capital must be accumulated?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 40P
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A machine has been purchased and installed at a total cost of P18,000.00. The machine will be retired at the end of 5 years, at which time it is expected to have a scrap value of P2,000.00 based on current prices. The machine will then be replaced with an exact duplicate. The company plans to establish a reserve fund to accumulate the capital needed to replace the machine. If an average annual rate of inflation of 3% is anticipated, how much capital must be accumulated?
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