Present value = Annual saving * PVAIF for 8.5% and 8 years | |||
= $73000*5.639183 | |||
$ 4,11,660.36 | |||
Alternatively it can be solved as below | |||
c= Cash Flow | 73000 | ||
i= Interest Rate | 8.5000% | ||
n= Number Of Periods | 8 | ||
Present Value Of An Annuity | |||
= C*[1-(1+i)^-n]/i] | |||
Where, | |||
C= Cash Flow per period | |||
i = interest rate per period | |||
n=number of period | |||
= $73000[ 1-(1+0.085)^-8 /0.085] | |||
= $73000[ 1-(1.085)^-8 /0.085] | |||
= $73000[ (0.4793) ] /0.085 | |||
= $4,11,660.36 | |||
8. Your company will generate $73,000 in annual savings each year for the next eight years...
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