You plan to buy a scroll saw to make wooden puzzles to sell at holiday time. The saw will cost $400. The materials for the puzzles cost $9 per puzzle and you expect to sell the puzzles for $12 each. Assuming that you buy the $400 saw today and that you sell 150 puzzles at the end of year 1 and 200 puzzles at the end of year 2, what is the net value today of your investment if interest rates are 4%?
| Description | Reference | Year-1 | Year-2 | Total |
| Sell price | $ 12.00 | $ 12.00 | ||
| Cost | $ 9.00 | $ 9.00 | ||
| Profit per puzzle | $ 3.00 | $ 3.00 | ||
| No of puzzles sold | 150 | 200 | ||
| Total profit | $ 450.00 | $ 600.00 | $ 1,050.00 | |
| PV factor @ 4% | 1/(1+4%)^time | 0.9615385 | 0.9245562 | |
| PV of profit today | Profit*PV factor | $ 432.69 | $ 554.73 | $ 987.43 |
| Purchase price of SAW | $ (400.00) | |||
| Net value today | $ 587.43 |
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