What is the present worth of all disbursements and receipts during the life time
ID: 2477962 • Letter: W
Question
What is the present worth of all disbursements and receipts during the life time of the project, evaluated at the beginning of the first year, if the project has the following costs: Phase 1 labor $2600000 (per year paid at the end of each year) Phase 1 Material $890000 (paid at the end of the first year only Phase 2 -years 4 to 10, all costs are paid at the end of each year and include: Launch $6900000 Insurance $500000 Labor $1900000 Material $610000 The project makes an annual income of $11000000 as a result of sales in phase 2. Hint: The present value of the net cash flow of phase 2, evaluated at the beginning of first year, must be greater than the sum of the present worth of labor and material costs of phase 1, also evaluated at the beginning of first year. The difference would be the answer to this problem. Make sure to include the sign (-) if the answer is negative. Remember, if the present worth of all disbursements and receipts is positive, the company will make at least 25% annual return on this investment. correct Answer is (-4023031)
can anyone show me how to get -4023031 answer? I get closer to the answer but not exactly. please show me how to get in a step by step method.
Explanation / Answer
End of year Profit Material Labor Launch Insurance Total T Discount factor 25% D Discounted Cash Flow T*D 0 1 -890000 -2600000 -3490000 0.8 -2792000 2 -2600000 -2600000 0.64 -1664000 3 -2600000 -2600000 0.512 -1331200 4 11000000 -610000 -1900000 -6900000 -500000 1090000 0.4096 446464 5 11000000 -610000 -1900000 -6900000 -500000 1090000 0.32768 357171.2 6 11000000 -610000 -1900000 -6900000 -500000 1090000 0.262144 285737 7 11000000 -610000 -1900000 -6900000 -500000 1090000 0.209715 228589.6 8 11000000 -610000 -1900000 -6900000 -500000 1090000 0.167772 182871.7 9 11000000 -610000 -1900000 -6900000 -500000 1090000 0.134218 146297.3 10 11000000 -610000 -1900000 -6900000 -500000 1090000 0.107374 117037.9 Total -4023031
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