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Nigel has purchased asteam-cleaning machine

Using £10 000 of his own money and £15 000 borrowedfrom the bank at 1% monthly interest, Nigel has purchased asteam-cleaning machine. Using this machine, he restores the facades of old, soot-covered buildings in London. He can work for ninemonths out of the year – the machine does not work wellduring the winter – and earns £2 000 a month. How much can Nigel pay himself per month if he wants to replace the machine before it becomes worthless, given that it depreciates at 20% per year, straight-line depreciation? If he puts money into a sinkingfund, it will earn 0.5% monthly interest. Assume that Nigel would like to be debt-free by the time that he replaces the machine, and that he wants to buy the replacement machine outright, rather than taking out another loan.

Apr 16 2018 Read more Less More

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