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Finance

present value of the revenue from the business over ten years? Would you invest in the business?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 8EB: Shonda & Shonda is a company that does land surveys and engineering consulting. They have an...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Homework Question 2: 2) Tee-Shirt Company: You are thinking about starting a new tee-shirt company using laser printing technology. The expected profit from the business is $5,000 per year from (T=1 to T=10). The investment cost to start the business is $25,000 (at T=0).

In year ten (T=10), you expect that you can sell the laser printing machine for $10,000.

Using an interest rate R=6%, answer the following questions:

What is the present value of the revenue from the business over ten years?
Would you invest in the business?

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