A company makes an investment in a new delivery van costing $47,000 and is expected to have a service life of 200,000 miles at an annual usage of 40,00 miles per year. The delivery service is expect to generate the following profits: $15K, in odd years and, - $20K, in even years, and the project is evaluated at a rate of 6%, A) What is the present value of this investment? B) What is the annual equivalent?
Useful life of investment=5 years
Initial cost=47000
Profits in year 1,3 &5=$15K
Profits in year 2,4=$20K
Ans a)
Present worth of Investment=PW of Profits-Initial costs=(15000/1.06)+(20000/1.06^2)+(15000/1.06^3)+(20000/1.06^4)+(15000/1.06^5)-47000=71595.90-47000=24595.9
Ans 2)
Annual equivalent=Present worth/Sum of discounting factors=24595.9/4.2125=$5838.98
A company makes an investment in a new delivery van costing $47,000 and is expected to have a service life of 200,000 mi...
2) A company makes an investment in a new delivery van costing $47,000 and is expected to have a service life of 200,000 miles at an annual usage of 40,00 miles per year. The delivery service is expect to generate the following profits: $15K, in odd years and, - $20K, in even years, and the project is evaluated at a rate of 6%, What is the present value of this investment? What is the annual equivalent? n In Out 0 30000 1 40000 15000 2 40000 15000 3 40000 15000 4 40000 15000 5 40000+3000 ...
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