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240ch23exer15-17 - CHAPTER 23 EXERCISES , fairlyeasy...

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CHAPTER 23 EXERCISES Now that we have worked PV-FV problems both forwards and backwards, these problems should be  fairly easy. EXERCISE 23-15 1. Although this exercise is worded differently than some of the ones we have done; it is  basically a PV problem.  We should be willing to pay no more than the PV of the  additional income the machine promises. $10,000 X 8.2438 (PV-annuity table) = $82,438 2. At an 8% rate, Audrey would need to own the car for approximately 35 years to save  enough money on gasoline expenses to offset the initial cost of the car.  The $14,000 is the  initial present value to be offset by annual savings of $1,200.  Therefore, $14,000/$1,200  = 11.667.  I then go to the PV annuity table, go to the 8% column, go down until I find a  number close to 11.667, and see that is between 30 and 40 years.   EXERCISE 23-16 1. The $250,000 is the PV.  We must therefore compute the PV of the $30,000/yr.
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