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A company makes a decision to expand its production line that requires initial investment of $100,000. The company finances this expansion project using 30% retained earnings and 70% loan that the interest rates are 8% for the equity financing and 13% for debt financing. Annual expense resulted from this expansion is expected to be about $10,000 for the next five years. The company expects uniform annual revenue in years 2 through 5 but expects only 50% of that annual revenue amount in year 1. How much is the uniform annual revenue in years 2 through 5 to achieve economic equivalence if the company decides to use MARR that is 3.5% higher than the cost of capital.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M946348

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