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Your company will generate $71,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 8.75 percent, what is the present value?



Answer :

anthougo

The present value of the annual revenue of $71,000 for seven years at 8.75% is $360,357.02

What is the present value?

The present value represents the discounted value of future cash flows over a period.

The present value can be computed using the PV table, formula, or an online finance calculator, as follows:

Data and Calculations:

N (# of periods) = 7 years

I/Y (Interest per year) = 8.75%

PMT (Periodic Payment) = $71,000

FV (Future Value) = $633,642.98 ($497,000 + $136,642.98)

Results:

Present Value (PV) = $360,357.02

Sum of all periodic payments = $497,000 ($71,000 x 7)

Total Interest $136,642.98

Thus, the present value of the annual revenue of $71,000 for seven years at 8.75% is $360,357.02

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