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1. Consider an asset which has no initial cost but for which there is an expenditure of $20,000 at the end of the first year. The net cost at the end of year 2 is $16,000. With an interest rate of 2%, what is the net present cost of this asset?

2. Consider an asset that you purchase for $50,000. Its nominal resale value after four years of ownership is $10,000. At that time you plan to sell it and retire at Lake Okoboji. What is the net present cost to you of holding this asset if the nominal discount rate is 3%?

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Category:- Financial Management
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