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Good afternoon,
I wanted to kindly ask for your help with the following exercise:
” An asset costs $10 million to construct and $4 million to remove it in 20 years. If interest rates were 5% the present value of the dismantling costs would be 1,507,558. What would be the liability at the year end?”
In the book, they say that the liability increases by 75,388 in the first year, making the year end liability 1,507,588. However, I am confused: I get the increase in the first year 75,378. Am I doing something wrong? Thank you!No, I think that that looks to be a misprint in the text!
Based on the figure of $1,507,558 and an interest rate of 5% then the finance charge should be $75,377(.90)
Ok?
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