proposed sailboat purchase. While the new sailboat is expected to generate additional operating profits of $18,000 per year for 10 years, and to be resold for $70,000 at the end of 10 years, it also requires substantial cash outlays. An immediate deposit of $80,000 is required, followed by $50,000 in one year’s time. In addition, sails will need to be replaced at the end of 5 years at an estimated cost of $12,000. The cost of raising the capital necessary to finance this sailboat purchase is…
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