Consider the cashflow (n = 10 years, MARR = e = 14%)Cash Flow AInvestmentP 180,000RevenuesP 350,000 per yearExpensesP 400,000 per yearfor the first 3 years,decreasing by P50,000 per yearthereaftera. Calculate the annual and present worth of the project.SalvageValueP 40,000

Present Worth: Present worth or Net present value (NPV) refers to the difference between the value…

Answered: . Calculate the annual and present…

Business

Accounting

. Calculate the annual and present worth of the project.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 27P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Consider the cashflow (n = 10 years, MARR = e = 14%)
Cash Flow A
Investment
P 180,000
Revenues
P 350,000 per year
Expenses
P 400,000 per year
for the first 3 years,
decreasing by P
50,000 per year
thereafter
a. Calculate the annual and present worth of the project.
Salvage
Value
P 40,000

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Step 1 Introduction - for your reference purpose

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Step 2 Pv factor table @ ( 14% , 10years) - for your reference purpose

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Step 3 Calculation of Present value (PV) of Net annual cash flows

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Step 4 Calculation of Present woth

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Step 5 Calculation of Annual worth (By using formula method)

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Step 6 Calculation of Annual worth (By using PV table) - simple method for step 5

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