Question

Question 4: Mola runs a pawn shop in Imre. Each year the shop brings in $1,500 while incurring a cost of only $1,000. Given that Mola has a discount rate of 11%, what is the annual worth of this business over a three year period?

          Question 4: Mola runs a pawn shop in Imre. Each year the shop brings in
$1,500 while incurring a cost of only $1,000. Given that Mola has
a discount rate of 11%, what is the annual worth of this business
over a three year period?

Added by Raul R.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Majid Borumand

Step 1

The net cash flow is the difference between the annual revenue and the annual cost. For the first year: Net cash flow = $1,500 - $1,000 = $500 For the second year: Net cash flow = $1,500 - $1,000 = $500 For the third year: Net cash flow = $1,500 - $1,000 = $500 Show more…

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Mola runs a pawn shop in Imre. Each year, the shop brings in $1,500 while incurring a cost of only $1,000. Given that Mola has a discount rate of 11%, what is the annual worth of this business over a three-year period?