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Home > categories > Machinery & Equipment > Other Construction Machinery > Suppose that the machinery in question costs $119000 and earns profit at a continuous rate of $52000 per year.?

Question:

Suppose that the machinery in question costs $119000 and earns profit at a continuous rate of $52000 per year.?

Use an interest rate of 8% per year, compounded continuously. When is the present value of the profit equal to the cost of the machinery?

Answer:

t=ln(119/52)/.08~=10.3 years.

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