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Homework answers / question archive /  A machine costs $170000 to purchase and will provide 54X100 a year in benefits the company plans to use the machine for 10 years and then will the machine for receiving 130000 Value What is the future worth it the company interest rate is 12%

 A machine costs $170000 to purchase and will provide 54X100 a year in benefits the company plans to use the machine for 10 years and then will the machine for receiving 130000 Value What is the future worth it the company interest rate is 12%

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 A machine costs $170000 to purchase and will provide 54X100 a year in benefits the company plans to use the machine for 10 years and then will the machine for receiving 130000 Value What is the future worth it the company interest rate is 12%.

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Initial investment or PV of Cash Outflow at Year 0= -170000

Number of Years to 10 Years(n) = 10-0= 10

Interest rate (i)= 12%

Future Value of single Present Value = PV*(1+i)^n

=-170000*(1+12%)^10

=-527994.1954

Annual Cash inflows each year (P)=40000

Number of years for which it is received (n)=10

FV of Annuity Formula =P*(((1+I)^n)-1)/I

=40000*(((1+12%)^10)-1)/12%

=701949.4028

Salvage value Received at year 10 or single PV= 30000

Years gap at 10(n)= 10-10= 0

Future Value of single Present Value = PV*(1+i)^n

=30000*(1+12%)^0

=30000

Future worth of Investment is Future Value of all Cash Flows

Future worth = Sum of all Cash Flow

=-527994.1954+701949.4028+30000

=203955.21

So future worth of Investment is $203955.21