Thursday, October 15, 2020

#377 Amalgamated Iron and Steel purchased

Amalgamated Iron and Steel purchased - Business Statistics

ChemistryExplain daily providing Q&A content “#377 Amalgamated Iron and Steel purchased" in Business Statistics, Statistics for business and economics, Small business statistics, Small business statistics 2019

ChemistryExplain “#377 Amalgamated Iron and Steel purchased in Business Statistics, Statistics for business and economics, Small business statistics

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Amalgamated Iron and Steel purchased a new machine for ramcambering large I-beams. The company expects to bend 80 beams at $2000 per beam in each of the first 3 years, after which thecompany expects to bend 100 beams per year at $2500 per beamthrough year 8. If the company's minimum attractive rate of returnis 18% per year, what is the present worth of the expectedincome?

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cash flows for the 1st 3years     =80*20000
                                                  = 160000
expected rate ofreturn              =18%
  From the tables,
           presentvalue factor        =0.609
Present value of the 1st3 years cashflow=0.609*160000
                                                           = 97440
Cash flows for the years4-8         =250000
From the tables,
   present valuefactor                  =0.437
Present value of the cash flows     =0.437*250000
                                                  = 109250
∴Present worth ofthe expected income =109250+97440
                                                             =206690

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