Question

Find the total present worth of a series of cash flows with an annual interest rate of 2% per year. Round your answer to the nearest cent.



Initial benefit of 5,330 at year 0

Benefit of 13,075 at year 3

Salvage value of 2,308 at year 4

Answer 1

The total present worth is $19,783.01

The present worth of a series of cash flow is the value of the cash flows in year 0 (today)

Cash flow in year 0 = 5330

Cash flow in year 1 = 0

Cash flow in year 2 = 0

Cash flow in year 3 = 13075 / (1.02)^3 = 12,320.86

Cash flow in year 4 = 2308 / (1.02)^4 = 2,132.24

Present worth = $19,783.01

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