the The Polynesian Urbanization Authority (PUA) buys new computuers for $100,000 in May. They estimate annual revenue will be from $50,000 to $400,000, but most likely about $300,000 over the next 5 years.
Operating and Maintenance costs will remain constant at $75,000/year. Their MARR-9%
Inflation is a constant 2.1%
1- what is the expected revenue for the company over 5 years using a beta distribution ?
2- what is the present worth of this revenue, adjusted for inflation?
Answer(2) | |||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 | |
Initial Cost | -100000 | ||||||
Annual Revenue | 300000 | 300000 | 300000 | 300000 | 300000 | ||
Less:- O&M Cost | 75000 | 75000 | 75000 | 75000 | 75000 | ||
EBIT | 225000 | 225000 | 225000 | 225000 | 225000 | ||
PVF@9% | 1 | 0.917 | 0.842 | 0.772 | 0.708 | 0.650 | |
Present Worth of Revenue | -100000 | 206422.02 | 189378.00 | 173741.28 | 159395.67 | 146234.56 | |
FVF @ 2.1% | 1.110 | 1.087 | 1.064 | 1.043 | 1.043 | 1 | |
Value at Year 5 | -110950.36 | 224315.35 | 201580.85 | 181132.78 | 166176.86 | 146234.56 | |
FV Of revenue | 808490.04 | ||||||
PVAF@9% | 3.8896 | ||||||
Present Worth of Revenue after Adjusting inflation | 207859.4302 | ||||||
Answer(1) | |||||||
Revenue | 1500000 | ||||||
Less:- O&M Cost | 375000 | ||||||
Less:- Initial Cost | 100000 | ||||||
Expected Revenue | 1025000 | ||||||
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