Question

Your company will generate $67,000 in annual revenue each year for the next seven years from a new information database. if the appropriate interest rate is 8.75 percent, what is the present value of the savings?

Answer 1

Answer:

Present Value= $340,055.22

Explanation:

Giving the following information:

Cash flow= 67,000

Number of years= 7

Interest rate= 8.75 percent

To calculate the present value, first, we need to calculate the final value using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= cash flow

FV= {67,000* [(1.0875^7)-1]} / 9.0875

FV= $611,722.28

Now, we can calculate the present value:

PV= FV/ (1+i)^n

PV= 611,722.28 / (1.0875^7)

PV= $340,055.22