Question

At an interest rate of 9% per year, the capitalized cost of $10,000 in year 0, $5000 per year in years 1 through 6, and $1000 per year thereafter forever is closest to :

Answer 1

Solution:-

Given,

Interest rate = 9%

Capitalized cost = $10,000 in year 0,

                                 $5,000 per year in year 1 through 6

                                  $1000 per year thereafter forever.

CC = -10,000 -5,000(P/A,9%,6)-(1,000/0.09)(P/F,9%,6)

      = -10,000-5000(4.486)-(90)(.5963)

      = -10,000-22,430-53.667

      = -$32,483.67