Question

How to calculate the PV? Explain the number that you put in PV function in excel please!

Question 3 A privately run, for-profit, prison is considering ways in which it can cut its monthly costs and therefore increase profit. One idea it is considering is to pay a judge to guarantee convicted prisoners in poor health win their appeals and are set free. The prison believes it can realize the monthly cost savings below over the initial year of the plan. What is the present value of the first year's monthly cost savings? Assume a discount rate of 8%. $49,701 4 points Month Savings ($) PV 1 3,500 $3,476.01) 6,000 $5,919.46) 6,500 $6,370.33) 4 9,000 $8,762.12) 9,000 ($8,705.91) 9,000 $8,648.25) 7 9,400 ($8,972.80) 8 9,800 ($9,048.94) 4,800 ($4,521.37) 5,000 $4,678.57) 11 2,000 ($1,859.03) 12 3,500 ($3,231.77) Total 77.509 ($74.194.571 E6 00 ou +wN

Answer 1

Using excel formula in case rate has not been rounded off hence the difference
rate =8%/12

Month	Savings	PV	Excel formula
1	3500	$3,476.82	PV(8%/12,1,0,-3500)
2	6000	$5,920.79	PV(8%/12,2,0,-3500)
3	6500	$6,371.71	PV(8%/12,3,0,-3500)
4	9000	$8,763.95	PV(8%/12,4,0,-3500)
5	9000	$8,705.91	PV(8%/12,5,0,-3500)
6	9000	$8,648.25	PV(8%/12,6,0,-3500)
7	9400	$8,972.80	PV(8%/12,7,0,-3500)
8	9800	$9,292.67	PV(8%/12,8,0,-3500)
9	4800	$4,521.37	PV(8%/12,9,0,-3500)
10	5000	$4,678.57	PV(8%/12,10,0,-3500)
11	2000	$1,859.03	PV(8%/12,11,0,-3500)
12	3500	$3,231.77	PV(8%/12,12,0,-3500)
Total	3500	$74,443.65