Question

You are looking to start a 3-D printed widget factory. The discount rate is currently 8 and you are projecting the following costs, profits & losses: In year 0 (now): Purchasing manufacturing equipment sand facility., and other startup costs will cost you $50,000. In year 1 you are fairly certain you will turn a profit of $9,000. In year 2, your marketing efforts should pay off and you will turn a profit of $12,000. In years 3 and 4 you should show a profit of $28,000 per year. State the profit (input number regularly) or loss (input number as a -xxx.xx) from the business in dollars and cents (do not use commas of the $ symbol)

Answer 1

Discount rate is 8%.

At time 0, there is cash outflow of $50,000.

the formula to calculate discounted value is given below:

here,

r is discount rate.

n is number of years.

total discounted values of future profits is calculated below:

Total present/discounted value of profit is $61,429.54.

The net profit will be:

61429.54 - 50000 = 11429.54