Answer:
Present Value= $74,018.97
Explanation:
Giving the following information:
The machine will provide $15,000 annual savings for 12 years and can be sold for $48,000 at the end of the period.
Interest rate= 15%
<u>To determine the present value of the savings, first, we need to determine the future value at the rate provided.</u>
We need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual save
FV= {12,000*[(1.15^12)-1]}/ 0.15
FV= 348,020 + 48,000= $396,020
Now, we can calculate the present value:
PV= FV/(1+i)^n
PV= 396,020/1.15^12= $74,018.97
