Question

A contractor was doing the 10-year planning for a construction business, which uses a MARR of 15% per year. The contractor anticipates income of $150,000 per year for years 1-5, and income of $200,000 per year for years 6-10.

1. Draw the cash flow diagram.
2. What is the future value (in year 10) of the income? (show steps and calculations)

Answer 1

Part A:

Part B:

FV = Sum [ CF * FVF(r%, n ]

FVF(r%, n ) = (1+r)^n

r = MARR

n = No. of Years.

Year	Bal Yrs	CF	FVF@15%	FV of CFs
1	9	$ 1,50,000.00	3.5179	$    5,27,681.44
2	8	$ 1,50,000.00	3.0590	$    4,58,853.43
3	7	$ 1,50,000.00	2.6600	$    3,99,002.98
4	6	$ 1,50,000.00	2.3131	$    3,46,959.11
5	5	$ 1,50,000.00	2.0114	$    3,01,703.58
6	4	$ 2,00,000.00	1.7490	$    3,49,801.25
7	3	$ 2,00,000.00	1.5209	$    3,04,175.00
8	2	$ 2,00,000.00	1.3225	$    2,64,500.00
9	1	$ 2,00,000.00	1.1500	$    2,30,000.00
10	0	$ 2,00,000.00	1.0000	$    2,00,000.00
FV of Net Income	$ 33,82,676.80

Pls do rate, if the answer is correct and Comment, if any further assistance is required