Question

Detailed Answer Steps Conclusion 2.2: Profits from recycling paper, cardboard, aluminium, and glass at the architectural engineering department have increased at a constant rate of $1100 in each of the last 3 years. If this year's profit (end of year 1) is expected to be $6000 and the profit trend continues through year 5. (a) what will the profit be at the end of year 5 and (b) what is the present worth of the profit at an interest rate of 8% per year? Points Grading Scale Elements Detailed Answer Steps Proper Units Conclusion

Answer 1

Profit this year = 6000

a) If profit tend to increase by 1100 each year, then profit after 5 years is 6000 + 5*1100 = 6000 + 5500 = 11500

b) Formula of present worth, PV = FV / (1+R)^N

where FV = Future value

PV = Present value

R = Rate of interest

N = Number of years

Thus present worth of 11500 at 8% is,

11500 / 1.4693 = PV

PV = 7826.85