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Home Q & A Board Science-Related Homework Help Mathematics
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ikrabbe ikrabbe
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6 years ago
A contract is estimated to yield net returns of $7000.00 quarterly for seven years. To secure the contract, an immediate outlay of $80 000.00 and a further outlay of $60 000.00 three years from now are required. If interest is 6% compounded quarterly, determine if the investment should be accepted or rejected.
Textbook 
Contemporary Business Mathematics with Canadian Applications

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
Authors:
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#1
6 years ago
PV of 60 000: n = 3(4) = 12; i =   = 0.015; FV = 60 000; I/Y = 6; P/Y = C/Y = 4
PV = 60000  = 50183.25
PVout = 80 000 + 50 183.25 = 130 183.25 = $130 183

Programmed solution:

For PVIN:
PMT = 7000; n = 7(4) = 28; i = 0.015; I/Y = 6; P/Y = C/Y = 4
PVIN = 7000  = 159087.02 = $159 087

Programmed solution:

NPV = 159 087 - 130 183 = $28 904, accept the project.
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