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Asset Value in "t" years










































Suppose the value of assets (in thousands of RM) of company Rainbow after t years is given by .

Find

(i) the initial value of the assets.

(ii) the value of the assets after 5 years,

(iii) the profit if the owner sells the assets after 8 years.


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Jul 25, 2012
Asset Value in t years
by: Staff


The answer:

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I don’t know what kind of assets company Rainbow has: savings accounts, bonds, stocks, land, machines, patents, customer goodwill, etc. Each of these assets will behave differently over the long run. For example, machines depreciate, patents and land could gain in value, etc.

Because of there is no information in the problem statement, I’m going to assume we can use the following formula for the sake of argument:


A = P*(1 + r)^t

A = final balance in an interest bearing account
P = principle (the initial deposit in the bank, or the Present Value of the Investment)
r = decimal form of interest rate for each period of time (annual)
t = number of years


(i) the initial value of the assets.

The initial value of the assets is “P”

(ii) the value of the assets after 5 years,

The value of the assets after 5 years = A

T = 5

A₅ = P*(1 + r)⁵



(iii) the profit if the owner sells the assets after 8 years.


Profit if the assets are sold assets after 8 years = A₈ - A₀

Profit = A₈ - A₀

Profit = P*(1 + r)⁸ - P*(1 + r)⁰

Profit = P*(1 + r)⁸ - P*1


Profit = P*(1 + r)⁸ - P

Profit = P*[(1 + r)⁸ - 1]




Thanks for writing.

Staff
www.solving-math-problems.com


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