Question

solve with explanation please

AlHessa Biotech (ABT) creates patient receiving software for emergency rooms and provides other software services to hospitals in the region. They release an update on their software every 3 years, and they have noticed that the same cycle of revenue each time they release an update. The year they release the update, they receive 332 SAR in revenue. The second year it decreases, and the bring in 462 SAR. The third year, they receive 14. They expect this pattern to remain for the foreseeable future Calculate the annual equivalent worth over the next 12 years in a market with a 14% interest rate

Answer 1

Annual worth remains the same for every repeat cycle, so if calculate annual worth for 3 yrs it will be same for 12 yrs, (cycle repeated 4 times)

Equivalent annual worth = [ 332 * (P/F,14%,1) + 462 *(P/F,14%,2) + 14 * (P/F,14%,3) ] * (A/P,14%,3)

= [ 332 *0.877193 + 462 *0.769468 + 14 *0.674972 ] *0.430731

= 282.63 ~ 283 (Nearest Dollar)