You are provided with the below table indicating the costs and the benefits for the system on 4 years with a discount factor of 15%. Calculate the Present Value (PV) for each year and fill the table. Given the formula to calculate the PV: PV = 1/(1 + i)" where n is the number of years and i is the discount rate. The system will cost $50,000 to be developed, and once operated it will cost $75,000 for the 1st year, $82,500 for the 2nd year, $91,000 for 3rd year, and $99,500 for 4th. The annual benefits are: $125,000 for the 1* year with an additional of $10,000 for each year after that, as stated in the below table. Use the cost benefit analysis technique to determine when the project pay back for its cost.
You are provided with the below table indicating the costs and the benefits for the system on 4 years with a discount factor of 15%. Calculate the Present Value (PV) for each year and fill the table. Given the formula to calculate the PV: PV = 1/(1 + i)" where n is the number of years and i is the discount rate. The system will cost $50,000 to be developed, and once operated it will cost $75,000 for the 1st year, $82,500 for the 2nd year, $91,000 for 3rd year, and $99,500 for 4th. The annual benefits are: $125,000 for the 1* year with an additional of $10,000 for each year after that, as stated in the below table. Use the cost benefit analysis technique to determine when the project pay back for its cost.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...
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