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22 February, 10:08

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?

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  1. 22 February, 12:52
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    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
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