A Computer You Are Considering for Your Business Would Add

question 12

Essay

A computer you are considering for your business would add $4,000 per year to your profit. It would cost $400 a year to buy a complete maintenance contract so that you would never have repair and upkeep expense. The obsolescence depreciation is 25% a year. The going market interest rate is 5%. Assume all costs and revenue occur at the end of the year. What is the present value of the income stream from the machine?

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Definitions:

Floater Policy

A policy that insures property that cannot be covered by specific insurance because the property is constantly changing in either value or location.

Property

Items, assets, or possessions owned by an individual or entity, including tangible and intangible forms.

Specific Insurance

Insurance policies designed to cover specific risks, objects, or scenarios, offering tailored protection against particular perils.

Collision Insurance

A type of automobile insurance that protects the insured against any loss arising from damage to the insured’s automobile caused by accidental collision with another object or with any part of the roadbed.