Question

Company expects revenue of $1 million in year 1, $1.2 million in year 2, and amounts increasing by $200,000 per year thereafter. If the company’s MARR is 5% per year, what is the future worth of the revenue through the end of year 10?

Answer 1

We can calculate the FV of the stream as follows:

Year	CF	Compounding Factor	Compounded CF
1	$ 1.00	(1+0.05)^(10-1)=	1.551328216	1.55132821597852*1=	$   1.55
2	$ 1.20	(1+0.05)^(10-2)=	1.477455444	1.47745544378906*1.2=	$   1.77
3	$ 1.40	(1+0.05)^(10-3)=	1.407100423	1.40710042265625*1.4=	$   1.97
4	$ 1.60	(1+0.05)^(10-4)=	1.340095641	1.340095640625*1.6=	$   2.14
5	$ 1.80	(1+0.05)^(10-5)=	1.276281563	1.2762815625*1.8=	$   2.30
6	$ 2.00	(1+0.05)^(10-6)=	1.21550625	1.21550625*2=	$   2.43
7	$ 2.20	(1+0.05)^(10-7)=	1.157625	1.157625*2.2=	$   2.55
8	$ 2.40	(1+0.05)^(10-8)=	1.1025	1.1025*2.4=	$   2.65
9	$ 2.60	(1+0.05)^(10-9)=	1.05	1.05*2.6=	$   2.73
10	$ 2.80	(1+0.05)^(10-10)=	1	1*2.8=	$   2.80
				Future worth = Sum of all compounded CF	$ 22.89

So FV is 22.89