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Sorbent has developed a new machine to manufacture toilet paper, which they expect they can use...

Sorbent has developed a new machine to manufacture toilet paper, which they expect they can use for a period of 9 years. However, it will cost them $8.75 million. What is the minimum annual cash flow they could accept in order to cover the costs of this machine? Sorbent have determined that a discount rate of 5.5% p.a. compounded annually is appropriate for this project.

Solutions

Expert Solution

Calculating Annual Payment,

Using TVM Calculation,

PMT = [PV = 8,750,000, FV = 0, N = 9, I = 0.055]

PMT = $1,258,595.26

Annual Withdrawal = $1,258,595.26

jeff jeffy answered 2 years ago
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