Question

A small company purchased now for $25,424 will lose $1,142 each year for the first 4 years. An additional $9,148 invested in the company during the fourth year will result in a profit of $7,272 each year from the fifth to the fifteenth year. At the end of 15 years, the company can be sold for $30,290. Compute the future worth of the investment when MARR = 15%.

Answer 1

ANSWER:

pw = purchase price + annual income in 1st 4 years(p/a,I,n) + amount invested in 4th year(p/f,I,n) + revenue from 5th to 15th year(p/a,I,n)(p/f,I,n) + salvage value(p/f,i,n)

pw = - 25,424 - 1,142(p/a,15%,4) - 9,148(p/f,15%,4) + 7,272(p/a,15%,11) (p/f,15%,4) + 30,290(p/f,15%,15)

pw = - 25,424 - 1,142 * 2.855 - 9,148 * 0.5718 + 7,272 * 5.234 * 0.5718 + 30,290 * 0.1229

pw = - 25,424 - 3,260.41 - 5,230.82 + 21,763.65 + 3,722.64

pw = - 8,428.939

fw = pw(f/p,i,n)

fw = - 8,428.939(f/p,15%,15)

fw = - 8,428.939 * 8.137

fw = - 68,586.27

so the future worth of the investment is -$68,586.27