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Chapter 5

Q. 5.16

A company purchased a small equipment for ₹70,000. Annual maintenance costs are expected to be ₹1,850, but extra income will be ₹14,000 per year. How long will it take for the company to recover its investment at an interest rate of 10% per year?

Step-by-Step

Verified Solution

0=-₹70,000+\left(₹14,000-₹1,850\right)\left(P/A,10\%,n\right)

 

\left(P/A,10\%,n\right)=5.76132

n is between 9 and 10;
therefore, it would take 10 years for the company to recover its investment.