Your company will generate $45,000 in cash flow each year for the next nine year

Question

Your company will generate $45,000 in cash flow each year for the next nine years from a new information database. The computer system needed to set up the database costs $260,000. Assume you can borrow the money to buy the computer system at 8.25 percent annual interest. Requirement 1: Calculate the present value of the generated cash flows. (Do not include the dollar sign ($).Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations.Round your answer to 2 decimal places (e.g., 32.16).) Present value $ Requirement 2: Can you afford the new system? (Click to select)NoYes

Explanation / Answer

Requirement 1:

CAlculating the present value :

Present value X:

X =45000*(1.0825^9-1)/(0.0825*1.0825^9)

= 278,219.88

Requirement 2:

The computer system needed to set up the database costs $260,000

As X> $260,000

Yes

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