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# A. B. Rayton Ltd. is planning to purchase a new machine to replace the old one in the firm's processing plant. It is estimates that the machine would cost $250,000 in five years' time. i. Given that the existing

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## A. B. Rayton Ltd. is planning to purchase a new machine to replace the old one in the firm's processing plant. It is estimates that the machine would cost $250,000 in five years' time. i. Given that the existing interest rate is 8%, how much money should the firm invest now to buy the machinery in five years' time? (2 marks) ii. The firm has an option to invest in a fixed deposit account at an interest rate of 12%. How much should the firm invest at the beginning of each year for the next FIVE (5) years to achieve this goal? (4 marks) iii. Differentiate between real and nominal interest rate. (4 marks)

- Expert Answer

## i Calculate the present value of the machines cost in five years time PV FV 1 rn Where PV is the pre View the full answer

**Related Book For**

## Intermediate Financial Management

ISBN: 978-1111530266

11th edition

Authors: Eugene F. Brigham, Phillip R. Daves

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