Question

Answer the question. A major electronics manufacturer expects to generate 4 years of revenue from its recently won government contract. The company forecasts that the revenue will be $200 million in the first year, and will increase by $ million every year for the following 3 years (years 2, 3, and 4). Using the end-of-the-year convention, what is the present worth of the entire 4-year revenue stream at an interest rate of 8% per year? in F B I s D = %

Answer 1

A C D E B5 X ✓ fx =NPV(B1,B4:E4) | B 1 Discount Rate 8% 2 Incremental Revenue (in $ millions) 3 Year 4 Revenue (in $ millions) 200 5 Present Value (in $ millions) 685.68 1 2 205 3 210 4 215