Question

Consider a project that costs $500 now is is expected to generate $250 in net revenues...

Consider a project that costs $500 now is is expected to generate $250 in net revenues at the end of each of the next three years. If the MARR is 6%, the future worth (year 3) of this project is most nearly ________.

A.

$300
B.

$210
C.

$225
D.

$200
E.

None of the above
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Answer #1

Solution:-

Future worth =FV of benefits -FV of costs

FV=PV*(1+i) ^n or A*(F|A, i, n)

Future value = 250*(F|A, 6%, 3) – 500 * (1.05^3)

                     = 250 * 3.152 – 578.8125

                    = 788 – 578.81

                     = 209.1875

The future value of the project is (A) $210

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