Executives at Bob's widgets notice the company’s revenues have increased by a constant amount of $5...

Executives at Bob's widgets notice the company’s revenues have increased by a constant amount of $5 million each year for the past several years. This trend is expected to continue for the foreseeable future. Suppose next year’s revenue is $300 million. Bob's widgets' MARR is 7%. You’re curious about the present worth of Bob's widgets' revenue over the next 5 years.

Expert Solution

Present worth is calculated as follows:

Year	CF	Discount Factor	Discounted CF
1	$ 300.00	1/(1+0.07)^1=	0.934579439	0.934579439252336*300=	$ 280.37
2	$ 305.00	1/(1+0.07)^2=	0.873438728	0.873438728273212*305=	$ 266.40
3	$ 310.00	1/(1+0.07)^3=	0.816297877	0.816297876890852*310=	$ 253.05
4	$ 315.00	1/(1+0.07)^4=	0.762895212	0.762895212047525*315=	$ 240.31
5	$ 320.00	1/(1+0.07)^5=	0.712986179	0.712986179483668*320=	$ 228.16
				Present worth= Sum of all Discounted CF	$ 1,268.29

It can be calculated mathematically as follows:

jeff jeffy answered 2 years ago

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