Question 1: t on an asset is expected to yield the following cash flow (starting

Question

Question 1: t on an asset is expected to yield the following cash flow (starting from year 2 to year 10) and the resale value (salvage) will be 8,000 dollars at the end of the 10h year. Investment on the asset is evenly split between present time and year 1 (investment is equal at present time and year 1). How much can be invested on this asset at the present time and year l considering the interest rate of 8% compounded annually. Please explain your work in detail. C-? C-?I-5000 I-5000 I-5000I-5000I-5000I-4000I-4000I-4000 4000 L-$8,000 4 7 10 C: Cost, I: Income, L: Salvage Value

Explanation / Answer

Year 0 1 2 3 4 5 6 7 8 9 10 Cashflow -X -X $5,000 $5,000 $5,000 $5,000 $5,000 $4,000 $4,000 $4,000 $12,000 Discounting factor 0.925926 0.857339 0.793832 0.73503 0.680583 0.63017 0.58349 0.540269 0.500249 0.463193 Cash Flow $4,287 $3,969 $3,675 $3,403 $3,151 $2,334 $2,161 $2,001 $5,558 Therefore X= 14,682 So Amount invested at the beginning and at the endof year 1 = $ 14,682

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