Question

In: Economics

Find the present worth of the following project, using i = 10%/year. Cash Flows Initial cost...

Find the present worth of the following project, using i = 10%/year.

Cash Flows

Initial cost $20000

Annual benefit for years 1 ~ 10 $6000

Annual benefit for years 11 ~ 20 $8000

Solutions

Expert Solution

Hey Here is the answer feel free to ask anything-

Calculation of present value:

-Initial Cost * Present Value Factor (10%, 0 year) + Annual Benefit * Present Value Annuity

Factor(10%,10 years) + Annual Benefit * Present Value Annuity Factor(10%,20-11years)

($200,000) * 1 + $6000 * 6.145 + $8,000 * (8.514-6.145)

($200,000) + 36,870 + 18,952

($144,178) is the present worth of the project.

Difference of Annuity factor for 11 and 20 years at 10% is used.

Rahul Sunny answered 2 years ago
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