Answer:
d) $16,550
Explanation:
First, The multiple options to the question
a)$12,500
b) $11,550
c) $14,050
d) $16,550
e) $15,000
Question: To determine the terminal value of the project
What do we know:
The Cash flow from the project is $5,000 per year and the rate is 10%
To determine the future value per year is as follows
Year 1 = (1+r)∧2= (1+0.1)∧2= 1.21
Year 2 = (1+r)∧1= (1+0.1)∧1= 1.1
Year 3 = (1+r)∧0= (1+0.1)∧0= 1
Based on these determinations, we determine the yearly value as follows
Year 1= 5,000 (1.21) = $6,050
Year 2 = 5,000 (1.1)= $5,500
Year 3= 5,000 (1) -= $5000
The terminal value = The total of the three years
= $6,050 + $5,500 + $5,000
= $16,550
