the life of the project will have a total value
equal to the sum of the
values to which the individual payments will
have grown, and will be
equal to:
7(1 + r)-i + 17(1 4- r)- 2 + . . . + l/(l + r) + U.
(a)
However, instead of making the investment in
the
problem would then be to determine a capital
supply schedule and, the-
oretically, the intersection point would
indicate the desired volume of in-
vestment to be undertaken. All projects
promising a return in excess of
this intersection rate would be acce
be able to follow the logic, though it is not
necessarily the sort of thing
that one need try to commit to memory.
Since U is a payment that is to be made
available to the investor
at the end of each year over the life of the
investment, the first payment
17(1 4- r) + U(l + r)- 1 4- . 4- 17(1 4- r)* 4U(l + r) = 1(1 + r)". (c)
Then we subtract equation (b) from equation
(c). The reason for this
maneuver is that many of the terms on the
left-hand side of equation (b)
appear also in equation (c), so that the
gression line, if straight, pass through the
means of its two variables? (b) Of
what practical value is this rule? (c) What is
the purpose of drift lines?
12. Usually, the dots on a scatter diagram do
not fall exactly along the regres-
sion line, but inst
reap profits by legally excluding competitors
from the field; a favorable
location for a business may result in the value
of the site exceeding the
rental payment for it; or, in general, the
control of any resource whose
supply is scarce relative to its d
of smaller firms as well as a desperate
struggle by the number 3 com-
pany in the Big Three to keep its share of the
market and this attrition
has come about in the face of rising car
prices. It has reflected, in other
words, a shift in consumer preferenc
plowed back, the stockholder benefits,
though, depending on his tax
status and cash needs, one stockholder will
prefer maximum payout while
another will prefer maximum plow-back. The
former gets his benefits
in the form of immediate cash income; the
latte