Question

A company invests AED 110,000 in a project with a lifetime of 35 years. The project gives an annual income of AED 12,000. The yearly maintenance costs are AED 3,500 and the salvage value for the project after 35 years is AED 20,500. The equation used for calculating the ROR or i*

Answer 1

Initial investment, I = AED 110,000

Annual income, A = AED 12,000

Maintenance cost, M = AED 3,500

Salvage value, S = AED 20,500

Useful life, n = 35 years

The net present value of the project can be written as

We can determine the RoR using trial and error method

Let us assume i= 10%

Now, assume i= 7%

Now we can determine the RoR using linear interpolation techniques

Like this we can determine the RoR. If having any query kindly contact. I am in serious need of help kindly help me will be bologe to you for your general is support. Please help me thank you.