The company, produce in-house in the US; The cost of equipment totals into 32.5 million at...

The company, produce in-house in the US; The cost of equipment totals into 32.5 million at the start of the first year. Which will have a salvage value of 3 million at the end of 6 years. After a recent area 51 raid, the company acquired a team of Area 51 aliens with an annual demand of 500,000. The operational costs and software maintenance is 700,000 annually. As the years go by, an inflation of 16% will demand increasing prices for these values. What will be the net present worth?

Expert Solution

Revenue for first year=51*500000=$25.5mn

Year	Revenue	Salvage	Operational Cost	Net Cash Flow	Present Value (Cash Flow/1.16^year)
0	(32,500,000)	0	0	(32,500,000)	(32,500,000.00)
1	25,500,000	0	700000	24,800,000	21,379,310.34
2	29,580,000	0	812000	28,768,000	21,379,310.34
3	34,312,800	0	941920	33,370,880	21,379,310.34
4	39,802,848	0	1092627.2	38,710,221	21,379,310.34
5	46,171,304	0	1267447.552	44,903,856	21,379,310.34
6	53,558,712	0	1470239.16	52,088,473	21,379,310.34
7	62,128,106	3,000,000	1705477.426	63,422,629	22,440,798.93
				PW (total)	118,216,661.00

Hence, net present worth is $118.2 mn

jeff jeffy answered 6 months ago

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