Your company will generate $47,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 7.1 percent, what is the present value of the savings?

The answer is $252415.91

Explanation:

Solution

Now

A step bu step solution is provided below in showing the present value of the savings

Given that:

Year Annual Revenues Calculations Present value

1 $47000 $47000 / (1.071) ^1 $43884.22

2 $47000 $47000 / (1.071) ^2 $40975

3 $47000 $47000 / (1.071) ^3 $38258.63

4 $47000 $47000 / (1.071) ^4 $35722.35

5 $47000 $47000 / (1.071) ^5 $33354.2

6 $47000 $47000 / (1.071) ^6 $31143.04

7 $47000 $47000 / (1.071) ^7 $29078.47

Total present value $252415.91

Hence the current or present value of the savings is $252415.91