Final answer:
To justify the investment in the machine, the market (resale) value at the end of four years needs to be $174,900.
Step-by-step explanation:
Investment refers to putting money into an asset or business with the expectation of generating more money in the future. There are different ways to do this, like buying stocks, bonds, or mutual funds. The main goal is to make your money grow over time.
Investment definition is an asset acquired or invested in to build wealth and save money from the hard earned income or appreciation. Investment meaning is primarily to obtain an additional source of income or gain profit from the investment over a specific period of time.
To justify the investment in the machine, we need to calculate the market (resale) value at the end of four years that will give a return of 15% per year. The net income after operating expenses is $10,000 per year.
Let's use the formula for the future value of an investment: FV = PV(1+r)^n, where FV is the future value, PV is the present value, r is the interest rate, and n is the number of years.
In this case, PV is $100,000, r is 0.15, and n is 4.
Plugging in these values, we get FV = $100,000(1+0.15)^4 = $100,000(1.15)^4 = $100,000(1.749) = $174,900.