Question

if the future worth of a product in 7 years is $10000. The annual profits of the product are the annual worth of the product are the annual worth of the product at %5 interests rate . if the product has initial cost of $2000 and a gradient flow maintenance cost starting at $225 the first year. Draw the cash flow diagram

Answer 1

Present value is calculated by taking into the consideration of annual payment, discount rate and period in years. The annual payment is discounted with the discount rate to calculate total present value of investment. The net present value of investment is calculated by deducting the initial investment cost from the total present value of investment.

present value is calculated below Intial cost = $2000 Interest rate -5% Annual cash flow - $225 7) present value = $225X (PVIFA 5% -74279 x 17.8892889 4412/12/5od =$225x5.78637 = $1302 present Value = $1302 CPX) cash flow diagram is as follows PY=$1302 Intial cast=$2000 1= 5 % $225 $225 $225 $225 $225 $225 $225 - 1 2 4 5 6 7 3 years