Calculate the present worth.

Question

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Answer 1

Question

Chapter 18, Problem 39P

To determine

Calculate the present worth.

Expert Solution & Answer

Explanation of Solution

Time period is denoted by ‘n’ and MARR is denoted by ‘i’. The present worth (PW) for the option ‘invest now’ can be calculated as follows:

PW=−First cost+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely))+(RevenueOptimistic×(POptimistic)))((1+i)n−1i(1+i)n)=−80,000,000+((35,000,000×(13))+(25,000,000×(13))+(10,000,000×(13)))((1+0.12)5−10.12(1+0.12)5)=−80,000,000+(11,666,667+8,333,333+3,333,333)(3.6048)=4,111,999

The present worth is $4,111,999.

The present worth (PW) for option ‘invest later’ can be calculated as follows.

PW=(−Cost+Revenue(1(1+i)1)−First cost(1(1+i)1)+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely)))((1+i)4−1i(1+i)4)(1(1+i)1))=(−4,000,000+900,000(1(1+0.12)1)−800,000,000(1(1+0.12)1)+((35,000,000×(12))+(25,000,000×(12)))((1+0.12)4−10.12(1+0.12)4)(1(1+0.12)1))=(−4,000,000+900,000(0.8929)−80,000,000(0.8929)+(17,500,000+12,500,000)(3.0373)(0.8929))=6,731.675

The present worth is $6,731,675. Since the present worth for the ‘invest later’ option is greater, select option ‘invest later’.

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Answer 2

Question

Chapter 18, Problem 39P

To determine

Calculate the present worth.

Expert Solution & Answer

Explanation of Solution

Time period is denoted by ‘n’ and MARR is denoted by ‘i’. The present worth (PW) for the option ‘invest now’ can be calculated as follows:

PW=−First cost+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely))+(RevenueOptimistic×(POptimistic)))((1+i)n−1i(1+i)n)=−80,000,000+((35,000,000×(13))+(25,000,000×(13))+(10,000,000×(13)))((1+0.12)5−10.12(1+0.12)5)=−80,000,000+(11,666,667+8,333,333+3,333,333)(3.6048)=4,111,999

The present worth is $4,111,999.

The present worth (PW) for option ‘invest later’ can be calculated as follows.

PW=(−Cost+Revenue(1(1+i)1)−First cost(1(1+i)1)+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely)))((1+i)4−1i(1+i)4)(1(1+i)1))=(−4,000,000+900,000(1(1+0.12)1)−800,000,000(1(1+0.12)1)+((35,000,000×(12))+(25,000,000×(12)))((1+0.12)4−10.12(1+0.12)4)(1(1+0.12)1))=(−4,000,000+900,000(0.8929)−80,000,000(0.8929)+(17,500,000+12,500,000)(3.0373)(0.8929))=6,731.675

The present worth is $6,731,675. Since the present worth for the ‘invest later’ option is greater, select option ‘invest later’.

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Answer 3

Question

Chapter 18, Problem 39P

To determine

Calculate the present worth.

Expert Solution & Answer

Explanation of Solution

Time period is denoted by ‘n’ and MARR is denoted by ‘i’. The present worth (PW) for the option ‘invest now’ can be calculated as follows:

PW=−First cost+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely))+(RevenueOptimistic×(POptimistic)))((1+i)n−1i(1+i)n)=−80,000,000+((35,000,000×(13))+(25,000,000×(13))+(10,000,000×(13)))((1+0.12)5−10.12(1+0.12)5)=−80,000,000+(11,666,667+8,333,333+3,333,333)(3.6048)=4,111,999

The present worth is $4,111,999.

The present worth (PW) for option ‘invest later’ can be calculated as follows.

PW=(−Cost+Revenue(1(1+i)1)−First cost(1(1+i)1)+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely)))((1+i)4−1i(1+i)4)(1(1+i)1))=(−4,000,000+900,000(1(1+0.12)1)−800,000,000(1(1+0.12)1)+((35,000,000×(12))+(25,000,000×(12)))((1+0.12)4−10.12(1+0.12)4)(1(1+0.12)1))=(−4,000,000+900,000(0.8929)−80,000,000(0.8929)+(17,500,000+12,500,000)(3.0373)(0.8929))=6,731.675

The present worth is $6,731,675. Since the present worth for the ‘invest later’ option is greater, select option ‘invest later’.

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Answer 4

Question

Chapter 18, Problem 39P

To determine

Calculate the present worth.

Expert Solution & Answer

Explanation of Solution

Time period is denoted by ‘n’ and MARR is denoted by ‘i’. The present worth (PW) for the option ‘invest now’ can be calculated as follows:

PW=−First cost+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely))+(RevenueOptimistic×(POptimistic)))((1+i)n−1i(1+i)n)=−80,000,000+((35,000,000×(13))+(25,000,000×(13))+(10,000,000×(13)))((1+0.12)5−10.12(1+0.12)5)=−80,000,000+(11,666,667+8,333,333+3,333,333)(3.6048)=4,111,999

The present worth is $4,111,999.

The present worth (PW) for option ‘invest later’ can be calculated as follows.

PW=(−Cost+Revenue(1(1+i)1)−First cost(1(1+i)1)+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely)))((1+i)4−1i(1+i)4)(1(1+i)1))=(−4,000,000+900,000(1(1+0.12)1)−800,000,000(1(1+0.12)1)+((35,000,000×(12))+(25,000,000×(12)))((1+0.12)4−10.12(1+0.12)4)(1(1+0.12)1))=(−4,000,000+900,000(0.8929)−80,000,000(0.8929)+(17,500,000+12,500,000)(3.0373)(0.8929))=6,731.675

The present worth is $6,731,675. Since the present worth for the ‘invest later’ option is greater, select option ‘invest later’.

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Answer 5

Chapter 18, Problem 39P

To determine

Calculate the present worth.

Expert Solution & Answer

Explanation of Solution

Time period is denoted by ‘n’ and MARR is denoted by ‘i’. The present worth (PW) for the option ‘invest now’ can be calculated as follows:

PW=−First cost+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely))+(RevenueOptimistic×(POptimistic)))((1+i)n−1i(1+i)n)=−80,000,000+((35,000,000×(13))+(25,000,000×(13))+(10,000,000×(13)))((1+0.12)5−10.12(1+0.12)5)=−80,000,000+(11,666,667+8,333,333+3,333,333)(3.6048)=4,111,999

The present worth is $4,111,999.

The present worth (PW) for option ‘invest later’ can be calculated as follows.

PW=(−Cost+Revenue(1(1+i)1)−First cost(1(1+i)1)+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely)))((1+i)4−1i(1+i)4)(1(1+i)1))=(−4,000,000+900,000(1(1+0.12)1)−800,000,000(1(1+0.12)1)+((35,000,000×(12))+(25,000,000×(12)))((1+0.12)4−10.12(1+0.12)4)(1(1+0.12)1))=(−4,000,000+900,000(0.8929)−80,000,000(0.8929)+(17,500,000+12,500,000)(3.0373)(0.8929))=6,731.675

The present worth is $6,731,675. Since the present worth for the ‘invest later’ option is greater, select option ‘invest later’.

Answer 6

Chapter 18, Problem 39P

To determine

Calculate the present worth.

Expert Solution & Answer

Explanation of Solution

Time period is denoted by ‘n’ and MARR is denoted by ‘i’. The present worth (PW) for the option ‘invest now’ can be calculated as follows:

PW=−First cost+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely))+(RevenueOptimistic×(POptimistic)))((1+i)n−1i(1+i)n)=−80,000,000+((35,000,000×(13))+(25,000,000×(13))+(10,000,000×(13)))((1+0.12)5−10.12(1+0.12)5)=−80,000,000+(11,666,667+8,333,333+3,333,333)(3.6048)=4,111,999

The present worth is $4,111,999.

The present worth (PW) for option ‘invest later’ can be calculated as follows.

PW=(−Cost+Revenue(1(1+i)1)−First cost(1(1+i)1)+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely)))((1+i)4−1i(1+i)4)(1(1+i)1))=(−4,000,000+900,000(1(1+0.12)1)−800,000,000(1(1+0.12)1)+((35,000,000×(12))+(25,000,000×(12)))((1+0.12)4−10.12(1+0.12)4)(1(1+0.12)1))=(−4,000,000+900,000(0.8929)−80,000,000(0.8929)+(17,500,000+12,500,000)(3.0373)(0.8929))=6,731.675

The present worth is $6,731,675. Since the present worth for the ‘invest later’ option is greater, select option ‘invest later’.

Answer 7

Chapter 18, Problem 39P

To determine

Calculate the present worth.

Answer 8

Expert Solution & Answer

Explanation of Solution

Time period is denoted by ‘n’ and MARR is denoted by ‘i’. The present worth (PW) for the option ‘invest now’ can be calculated as follows:

PW=−First cost+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely))+(RevenueOptimistic×(POptimistic)))((1+i)n−1i(1+i)n)=−80,000,000+((35,000,000×(13))+(25,000,000×(13))+(10,000,000×(13)))((1+0.12)5−10.12(1+0.12)5)=−80,000,000+(11,666,667+8,333,333+3,333,333)(3.6048)=4,111,999

The present worth is $4,111,999.

The present worth (PW) for option ‘invest later’ can be calculated as follows.

PW=(−Cost+Revenue(1(1+i)1)−First cost(1(1+i)1)+((RevenuePessimistic×(PPessimistic))+(RevenueMost likely×(PMost likely)))((1+i)4−1i(1+i)4)(1(1+i)1))=(−4,000,000+900,000(1(1+0.12)1)−800,000,000(1(1+0.12)1)+((35,000,000×(12))+(25,000,000×(12)))((1+0.12)4−10.12(1+0.12)4)(1(1+0.12)1))=(−4,000,000+900,000(0.8929)−80,000,000(0.8929)+(17,500,000+12,500,000)(3.0373)(0.8929))=6,731.675