Pittsburgh Custom Products (PCP) purchased a new machine for ram cambering large I beams. PCP expects to bend 80 beams at $2000 per beam in each of the first 3 years, after which it expects to bend 100 beams per year at $2500 per beam through year 8. If the company's minimum attractive rate of return is 18% per year, what is the present worth of the expected revenue? Round your answer to the nearest dollar.
Pittsburgh Custom Products (PCP) purchased a new machine for ram cambering large I beams. PCP expects to bend 80 beams at $2000 per beam in each of the first 3 years, after which it expects to bend 100 beams per year at $2500 per beam through year 8. If the company's minimum attractive rate of return is 18% per year, what is the present worth of the expected revenue? Round your answer to the nearest dollar.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please solve the problem and draw a diagram for the problem, Make sure you post pictures of your work instead of writing it. Please! Thank you for your help.
Transcribed Image Text:**Problem Statement:**
Pittsburgh Custom Products (PCP) purchased a new machine for ram cambering large I beams. PCP expects to bend 80 beams at $2000 per beam in each of the first 3 years, after which it expects to bend 100 beams per year at $2500 per beam through year 8. If the company’s minimum attractive rate of return is 18% per year, what is the present worth of the expected revenue?
Round your answer to the nearest dollar.
**Solution:**
**Correct Answer:**
823,691
The problem involves calculating the present worth of a series of cash flows with a specified interest rate. PCP plans to produce a certain number of beams with varying prices over 8 years, and by using the company’s minimum attractive rate of return, the future revenues are discounted to find their present value. The given answer indicates the calculated present worth at $823,691.
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