Questions 3,4 appreciated please show work!! Determine the present worth of an i
ID: 2493740 • Letter: Q
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Questions 3,4 appreciated please show work!!
Determine the present worth of an investment that returns $4500 in year 1, $4,000 in year 2, $3500 in year 3, and continues to decrease by $500 per year until the yield is zero. Assume an interest rate of 3%, compounded annually. Machine A costs $8000 to purchase and $3000 per year to operate. It lasts for 6 years, and has no salvage value at the end of its life. Machine B costs $16,000 to purchase and $4000 per year to operate. It lasts for 9 years and has a salvage value of $3000 at the end of its life. Compare the two machines on the basis of net present worth using an interest rate of 12%, compounded annually and the repeated projects approach.Explanation / Answer
3) Determine the present worth of an investment Year Cash Flows Discount @3% Present value of cash flows 0 1 1 4500 0.97087379 4368.93204 2 4000 0.94259591 3770.38364 3 3500 0.91514166 3202.99581 4 3000 0.88848705 2665.46114 5 2500 0.86260878 2156.52196 6 2000 0.83748426 1674.96851 7 1500 0.81309151 1219.63727 8 1000 0.78940923 789.409234 9 500 0.76641673 383.208366 10 0 0.74409391 0 Present Worth of the Investment 20231.518 4) Machine A Year Cash Flows Discount @12% Present value of cash flows 0 8000 1 8000 1 3000 0.89285714 2678.57143 2 3000 0.79719388 2391.58163 3 3000 0.71178025 2135.34074 4 3000 0.63551808 1906.55424 5 3000 0.56742686 1702.28057 6 3000 0.50663112 1519.89336 Net Present Worth 20334.222 Machine B Year Cash Flows Discount @12% Present value of cash flows 0 16000 1 16000 1 4000 0.89285714 3571.42857 2 4000 0.79719388 3188.77551 3 4000 0.71178025 2847.12099 4 4000 0.63551808 2542.07231 5 4000 0.56742686 2269.70742 6 4000 0.50663112 2026.52448 7 4000 0.45234922 1809.39686 8 4000 0.40388323 1615.53291 9 4000 0.36061002 1442.4401 9 -3000 0.32197324 -965.91971 Net Present Worth 34255.0262
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