How much can Haydon Rheo systems(F) , Inc., afford to spend now on an energy management system if the software will sav...
How much can Haydon Rheo systems(F) , Inc., afford to spend now on an energy management system if the software will save the company $21,300(A) per year for the next 5 years? Use an interest rate of 10% per year
Homework Answers
Annual savings = 21,300
Time period = 5 years
Interest Rate = 10%
How much the company afford to spend now?
For this calculate the PRESENT VALUE of the annual savings.
We have to use the (P/A, I, N) factor to calculate the present
value of annual savings.
Present Value = A(P/A, 10%, 5)
Present Value = 21,300 (P/A, 10%,5)
Present Value = 21,300 (3.79079)=80,743.8
Rounding to nearest dollar PW = $80,744
The company afford to spend 80,744.
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