Homework SourseA mine is for sale for 450000 It is believed the mine will p
A mine is for sale for $450,000. It is believed the mine will produce a profit of $100,000 the first year, but the profit will decline $5000 a year after that, eventually reaching zero, whereupon the mine will be worthless. What rate of return would be earned on the mine?
Solution
from the problem,
total profit,
5000
sum of above=1050000
total profit from mine=1050000
rate of return=((total profit-buying cost)/.buying cost)x100=((1050000-450000)/45000)x100=223.33
| 100000 |
| 95000 |
| 90000 |
| 85000 |
| 80000 |
| 75000 |
| 70000 |
| 65000 |
| 60000 |
| 55000 |
| 50000 |
| 45000 |
| 40000 |
| 35000 |
| 30000 |
| 25000 |
| 20000 |
| 15000 |
| 10000 |
| 5000 sum of above=1050000 total profit from mine=1050000 |
