Problem 03.005 Present Worth CalculationsCivil engineering consulting firms that provide services to outlying communities are vulnerable to a number of factors thataffect the financial condition of the communities, such as bond issues, real estate developments, etc. A small consulting firmentered into a fixed-price contract with a spec home builder, resulting in a stable income of $395,000 per year in years 1through 7. At the end of that time, a mild recession slowed the development, so the parties signed another contract for$180,000 per year for 4 more years. Determine the present worth of the two contracts at an interest rate of 7% per year.The present worth of the two contracts is determined to be $1

Information Provided: Interest rate = 7% Cashflow (Year 1-7) = $395,000 Cashflow (Year 8-11) =…

Answered: The present worth of the two contracts…

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The present worth of the two contracts is determined to be $

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Problem 03.005 Present Worth Calculations
Civil engineering consulting firms that provide services to outlying communities are vulnerable to a number of factors that
affect the financial condition of the communities, such as bond issues, real estate developments, etc. A small consulting firm
entered into a fixed-price contract with a spec home builder, resulting in a stable income of $395,000 per year in years 1
through 7. At the end of that time, a mild recession slowed the development, so the parties signed another contract for
$180,000 per year for 4 more years. Determine the present worth of the two contracts at an interest rate of 7% per year.
The present worth of the two contracts is determined to be $1

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