Peter is thinking of buying a new house which is expected to last forever.
He is perfectly satisfied with the new house in basically all aspects,
except for the gate, which has only five years of life left. A new gate
would last 20 years, but would cost $20,000. Assuming that the costs will
remain constant and that the interest rate is 5%, what is the value of the
existing gate?
He is perfectly satisfied with the new house in basically all aspects,
except for the gate, which has only five years of life left. A new gate
would last 20 years, but would cost $20,000. Assuming that the costs will
remain constant and that the interest rate is 5%, what is the value of the
existing gate?