no5 5. It is estimated that a timber tract will yield an...
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5. It is estimated that a timber tract will yield an annual profit of P 100, 000 for 6 years, at the end of which time the timber will be exhausted. The land itself will then have an anticipated value of P 40,000.00. If a prospective purchaser desires a return of 8 % on his investment and can deposit money in a sinking fund at 4 %, what is the maximum price he should pay for the tract. (3 points) 6. A mine is purchased for P1M and it is anticipated that it will be exhausted at the end of 20 years. If the sinking fund rate is 4 %, what must be the annual return from the mine to realize a return of 7% on the investment? (3 points)
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