You can buy a machine for 100

Economics Nov 28, 2020

You can buy a machine for 100.000 TL that will produce a net income of 30.000 TL per year for four years. If you decide to sell the machine at the end of 4 years, what should be the resale value in order to recover your money if interest rate is 15% per year? (What is the equivalent Future value of the 100.000 TL initial machine cost and 30.000 TL annual revenues for 4 years until the d of year 47). a) 25098 b) 136456 C) 60000 124966 e) 146350 Bo? b?rak

Expert Solution

Initial cost = 100,000

Net income every year = 30,000

Interest rate = 15%

Year	Net Income	Present value of net income
1	30,000	26,086.96
2	30,000	22,684.31
3	30,000	19,725.49
4	30,000	17,152.60
		85,649.35

Net present value of selling price = 100,000 - 85,649.35 = 14,350.65

Future value of selling price = 14,350.65 * (1 + 0.15)^⁴ = 25,098

Option A is correct.

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