1. MARR Present worth analysis

Is there anyone kind enough to solve this problem for me? I have my semester final ahead, and struggling with this problem. I am attaching my understanding too.
ps: also calculating for 30 years seems confusing
.IMG_2124.jpg IMG_2125.jpg

2. Originally Posted by Tayeeba
Is there anyone kind enough to solve this problem for me? I have my semester final ahead, and struggling with this problem. I am attaching my understanding too.
ps: also calculating for 30 years seems confusing
.IMG_2124.jpg IMG_2125.jpg
I can't read everything in the scan of the exercise; for instance, items in the table are too small for me to see. Also, I can't read the sideways stuff. Please reply with clarification. Thank you!

3. Originally Posted by Denis
As far as I can tell:

Model A:
Cost: 50000
Revenue:
10000 : 1st 5 years
15000 : next 10 years
15th year salvage value: 5000

Calculation of PV:
-50000
+ PV of 10000 annually: n = 5, i = .10
+ PV of 15000 annually: n = 10, i = .10 : let that = x
+ PV of x over 5 years: x/(1.10^5)
+ PV of 5000 over 15 years: 5000/1.10^15

If I didn't goof, that results in net PV of 46334.22

I'm NOT doing the other 2 models!!

Note that 10000 for 15 years and 5000 for 10 years
would work out the same.

EDIT:
on this one:
+ PV of 15000 annually: n = 10, i = .10 : let that = x

That's the PV as at end of 5th year, of course;
result has to be PV'd again, for 5 years.

you are right about the numbers of model A, for model B: first cost $40k, salvage value$2k, annual profet: $10k+$1k/year increase, life (years): 10.
model C: first cost $10k, salvage$0, annual profit $9k, life (years): 5. i understand what you did for model A except the line PV of X over 5 years. Here you calculated the Future value of$15k for 5 years right? Why is that when the problem says $15k annuity for 10 years, (what you did the line before PV of X over 5 years). Please help me here. Youd did 15 K annuity for 10 years, but why again 15k future value for 5years? also i need to convert every model’s life in 30 years right to do a fair comparison. So how can i find the value of 30 years for model A? i just have these two problems with model A, Once understood, I can do B and C by myself. thanks again Denis. also can you please suggest me any YouTube video to get clear idea about marr,irr and err. I have read my textbooks but still have many confusions 4. Originally Posted by Denis No. I'll try and explain again. (not easy without chalk/blackboard!) Step 1: calculate PV of$15000 annuity over 10 years
15000 * (1 - 1/(1.10)^10 / .10 = ~92168

Since the $15000 begins in 5 years, then the above PV is effective 5 years later than today. So today, we look at that$92168 as a FV 5 years later,
and calculate its PV:
Step 2: calculate PV of 92168

92168 / 1.10^5 = ~57229

OK?

As far as extending to 30 years, seems we need
something more about salvage value, plus what
will the revenue be...still $15000 annually? Hey, thanks I got it clearly now.1CE3FD6D-B379-44DF-B7B1-855BDF1A4215.jpg also found the the value in 30 years too. It’s the value in 15 years+future value over next 15 years. thanks a ton for helping me out. 5. Originally Posted by Denis No. I'll try and explain again. (not easy without chalk/blackboard!) Step 1: calculate PV of$15000 annuity over 10 years
15000 * (1 - 1/(1.10)^10 / .10 = ~92168

Since the $15000 begins in 5 years, then the above PV is effective 5 years later than today. So today, we look at that$92168 as a FV 5 years later,
and calculate its PV:
Step 2: calculate PV of 92168

92168 / 1.10^5 = ~57229

OK?

As far as extending to 30 years, seems we need
something more about salvage value, plus what
will the revenue be...still \$15000 annually?

6. Originally Posted by Denis

PV of 10000 annuity, 5 years:
10000 * (1 - 1/1.10^5) / .10 = 37907.87 [1]

PV as at end of year5 of 15000 annuity, 10 years:
15000 * (1 - 1/1.10^10) / .10 = 92168.51
PV of above as at today: 92168.51 / 1.10^5 = 57229.39 [2]

PV salvage value, 15 years:
5000 / 1.10^15 = 1196.96 [3]

Net PV today:
-50000.00 + [1] + [2] + [3] = 46334.22

OK???
perfect, I can’t thank you enough for your time and patience. The God bless you

7. Originally Posted by Denis
I'd rather you buy me for Xmas a pencil with eraser

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