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A project has an initial cost of $100,000 and uniform annual benefits of $12,500. At the end of its 8-year useful life, its salvage value is $30,000. At a 10% interest rate, the net present worth of the project is approximately:__________
1- $-19,318
2- $0
3- $+30,000
4- $+100,000

Sagot :

Okpalawalter8idn

Answer:

[tex]X=-\$19318[/tex]

Explanation:

From the question we are told that:

Initial cost [tex]P= $100,000[/tex]

Annual benefits [tex]A= $12,500[/tex]

Salvage value [tex]S= $30,000[/tex]

Interest rate [tex]I=10\%=>0.10[/tex]

Time [tex]t=8years[/tex]

Generally the equation for Net Project worth X is mathematically given by

  [tex]X=-P+A+S[/tex]

Where

Present worth of Annual benefits A is

 [tex]A'=A(P/a,0.10,8)[/tex]

 [tex]A'=12500*5.3349[/tex]

 [tex]A'=\$66686.25[/tex]

Present worth of Salvage Price S is

 [tex]S'=S(P/a,0.10,8)[/tex]

 [tex]S'=30000*0.46651[/tex]

 [tex]S'=\$13995.3[/tex]

Therefore

 [tex]X=-P+A'+S'[/tex]

 [tex]X=-100000+66686.25+\$13995.3[/tex]

 [tex]X=-\$19318[/tex]

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