1 of 1 Homework 5.16 Modified Consider the following investment project: using M
ID: 1116941 • Letter: 1
Question
1 of 1 Homework 5.16 Modified Consider the following investment project: using MARR of 12% 0 -$42,000 32.400 3.400 32,500 32.500 33,000 Calculate the Net Present Worth (Old- Treat An as F's) (6pts] Calculate the Net Future Worth (New - Treat An as P's) a. b. Investment Pool (Option 1) [1] Investment Pool (Option 2) & Cash Accumulated & Eq Present Worth [8] Project Balance (Borrowed) & Net Future Worth & Eq Present Worth [8] - EXPLAIN what you found? Acceptable? [1] Relationships between PW, FW, Cash Accumulated, Project Balance [4] c.Explanation / Answer
Answer:
(a) The Net Present worth is as shown in the table below:
Year
Cash flows
Present Worth
0
$ -42,000.00
$ -42,000.00
1
$ 32,400.00
$ 28,928.57
2
$ 33,400.00
$ 26,626.28
3
$ 32,500.00
$ 23,132.86
4
$ 32,500.00
$ 20,654.34
5
$ 33,000.00
$ 18,725.09
Net Present Worth
$ 76,067.13
(b) The Nep Future worth is as shown in the table below:
Year
Cash flows
Future Worth
0
$ -42,000.00
$ -23,831.93
1
$ 32,400.00
$ 20,590.79
2
$ 33,400.00
$ 23,773.46
3
$ 32,500.00
$ 25,908.80
4
$ 32,500.00
$ 29,017.86
5
$ 33,000.00
$ 33,000.00
Net Future Worth
$ 108,458.98
(c) Yes, The preoject is acceptable since it has positive net present worth
Year
Cash flows
Present Worth
0
$ -42,000.00
$ -42,000.00
1
$ 32,400.00
$ 28,928.57
2
$ 33,400.00
$ 26,626.28
3
$ 32,500.00
$ 23,132.86
4
$ 32,500.00
$ 20,654.34
5
$ 33,000.00
$ 18,725.09
Net Present Worth
$ 76,067.13
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