Question

Estimated savings-first year, $120,000
Estimated savings-second year, $300,000
Estimated savings-third, fourth, and fifth years,
              add 7 percent to each previous year
Estimated one-time costs-first year, $450,000
Estimated additional operating costs-first year, $110,000
Estimated additional operating costs-second year, $140,000
Estimated additional operating costs-third, fourth, and fifth years, add 7
Percent to the previous year
Federal income tax rate-48 percent
Present value of $1 at 20 percent-first year (calculate with Excel formula)
Present value of $1 at 20 percent-second year, (calculate with Excel formula)
Present value of $1 at 20 percent-third year, (calculate with Excel formula)
Present value of $1 at 20 percent-fourth year, (calculate with Excel formula)
Present value of $1 at 20 percent-fifth year, (calculate with Excel formula)

	Years from start of system implementation
	1	2	3	4	5	5-Year Total
Estimate Savings
Estimate One-Time Cost
Est Addition at Operating Cost
Total Cost
Net Savings(Losses Before
Federal Income Taxes)

				At 20%
YEAR	Net Savings (Losses) Before Federal Income Taxes	Federal Income Tax Rate at a 48% Rate	Net Savings (Losses) After Federal Income Taxes	Present Value of $1.00	Pre-Value of Net Savings (Losses)
1
2
3
4
5
Total

Answer 1

Years from start of system implementation
	1	2	3	4	5	5-Year Total
Estimate Savings	120000	300000	321000	343,470	367,513	1,451,983
Estimate One-Time Cost	450,000					450000
Est Addition at Operating Cost	110,000	140,000	149,800	160,286	171,506	731,592
Total Cost	560,000	140,000	149,800	160,286	171,506
Net Savings(Losses Before	-440,000	160,000	171,200	183184	196,007	270391
Federal Income Taxes)

YEAR	Net Savings (Losses) Before Federal Income Taxes	Federal Income Tax Rate at a 48% Rate	Net Savings (Losses) After Federal Income Taxes	PVF@20%	Pre-Value of Net Savings (Losses)
1	-440,000	-211200	-651200	0.833	-542,450
2	160,000	76,800	83,200	0.694	57,741
3	171,200	82,176	89,024	0.579	51,545
4	183,184	87,928	95,256	0.482	45,914
5	196,007	94,083	101,924	0.402	40,973
Total	270391	129,787	140,604		-346277