The demand for a product during the next ten years will be such that revenues will be $100,000 the first year and will increase by $10,000 each year thereafter. If inflation is assumed to be 6% per yuear and the company uses 10% in its economic studies, what is the present worth of the revenues expressed in present dollars?

The demand for a product during the next ten years will be such that revenues will be $100,000 the first year and will increase by $10,000 each year thereafter. If inflation is assumed to be 6% per yuear and the company uses 10% in its economic studies, what is the present worth of the revenues expressed in present dollars?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 20EA: Towson Industries is considering an investment of $256,950 that is expected to generate returns of...

See similar textbooks

Similar questions

Towson Industries is considering an investment of $256,950 that is expected to generate returns of $90,000 per year for each of the next four years. What Is the Investments internal rate of return?
Your company forecasts that next year's sales will be $59.00 million, Cost of Goods Sold (COGS) will be 85% of sales, and the Days Payables Outstanding (DPO) ratio will be 22.19. What is the forecasted accounts payable for next year?
Today (n=0), a company invests $1,000 and expects that investment to grow 10% each period for the next six periods (n=6). What is the investment's expected future value?
The profit from the sale of a product is expected to increase at an annual rate of 8%. First-year profit is estimated to be $90,000, the time horizon is 8 years, and the interest rate is 10% per year. Calculate the equivalent future value at time 8 of the 8 years of product profits.
What is the dollar-weighted return on a $100 investment that generates annual returns of $20, $15, $10, and $130, respectively in four years?
If the annual cost of a given good rises 2.3% per year for the next 20 years, write an equation to model the approximate cost of the good during any year in the next 20. Determine how long it will take for the price of the good to double.
Suppose that your salary is $45,000 in year one, will increase at 4%per year through year four, and is expressed in actual dollars as follows: If the general price inflation rate (f ) is expected to average 6% per year, what is the real dollar equivalent of these actual-dollar salary amounts? Assume that the base time period is year one (b = 1).
A DSL company has made an equipment investment of $40 million with the expectation that it will be recovered in 10 years. The company has a MARR based on a real rate of return of 12% per year. If inflation is 7% per year, how much must the company make each year (a) in constant-value dollars, and (b) in future dollars, to meet its expectation?
A new investment is expected to return $15,000 per year, starting from next year (t=1) for ten periods (i.e., from t=1 to t=10). Thus, the sum of the expected returns over those periods is $150,000. How much is the sum of the present value of the expected return over those periods, assuming that the annual interest rate is 5%?
The present worth of income from an investment that follows an arithmetic gradient was projected to be P 475,000. Ifthe income in year one is expected to be P 25,000, how much would the gradient have to be in each year through year 8 if the interest rate is 10% per year?
Suppose Naboo Manufacturing's sales increase 20% over the next year. Assuming that all asset accounts change proportionately to sales, what will the company be paying in taxes in 2020?
Assume that next year, management wants the company to earn a minimum profit of $ 500,000. How many units will have to sold to meet this target profit figure?