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Tutorial 5

# Tutorial 5 - Example 3 • John wants to estimate the value...

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Tutorial 5

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Example 1 A proposed investment would have cash flows as given in the table. a) Use a simple test to state an upper limit on the number of positive IRRs that there can possibly be for the proposed investment. b) Write out an equation which, if solved, would give the approximate ERR of the
Example 2 An asset has an initial cost of \$130,000 and an estimated salvage value of \$10,000 after 12 years. a) Find the accumulated depreciation at the end of 5th year using straight line method of depreciation. b) Find the depreciation rate (d) that will equalize the book value of the asset after 12 years to its salvage value at that time.

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Unformatted text preview: Example 3 • John wants to estimate the value of a house 20 years after purchase. The house value declines proportionally every year. The purchase price was \$245,000 three years ago, and its salvage value now is estimated as \$180,000. What is the estimated value of the house after 20 years? Example 4 • A machine has a life of 30 years, costs \$245,000, and has a salvage value of \$10,000 under the straight-line depreciation. What depreciation rate will result in the same book value for both the DB and SL methods at the end of year 20?...
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Tutorial 5 - Example 3 • John wants to estimate the value...

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