Calculating the present worth of an item
Calculating the present worth of an item
(OP)
I am studying to take the PE examination and it has been MANY years since I went to school. I purchase one of the study guides from the ncees and there is a question on calculating the present worth of an investment.
Can someone help me understand the question and answer?
Thank you in advance.
The question and answer are as follows:
A computing system costing $50,000 is installed initially. A second computer is installed 2 years later at a cost of $50,000. Each unit requires a maintenance cost of $10,000/year of operation.
The computers have zero salvage.
Assume a 10% rate of return and a 10% interest rate.
What is the present worth of the investment and maintenance cost for the first 4 years?
The answer is
PW = 50,000[1+ (p/f)10%,2] + 20,000(p/a)10%,4 -10,000(p/a)10%,2 = 137,365
Could some break down step by step in detail the answer to this problem. Please identify each component in simple terms
Can someone help me understand the question and answer?
Thank you in advance.
The question and answer are as follows:
A computing system costing $50,000 is installed initially. A second computer is installed 2 years later at a cost of $50,000. Each unit requires a maintenance cost of $10,000/year of operation.
The computers have zero salvage.
Assume a 10% rate of return and a 10% interest rate.
What is the present worth of the investment and maintenance cost for the first 4 years?
The answer is
PW = 50,000[1+ (p/f)10%,2] + 20,000(p/a)10%,4 -10,000(p/a)10%,2 = 137,365
Could some break down step by step in detail the answer to this problem. Please identify each component in simple terms





RE: Calculating the present worth of an item
2. Look up NPV in Excel Help.
3. Look up NPV on Google.
HAZOP at www.curryhydrocarbons.ca
RE: Calculating the present worth of an item
FV Actual Cost PV Cost
Y0 = 50,000 50,000.00
Y1 = 10,000 9090.91
Y2 = 60,000 49,586.78
Y3 = 20,000 15,026.30
Y4 = 20,000 13,660.27
Total 160,000 137,364.25
PV = FV/(1+rate)^year
PV = 50,000 + FV1/(1+.1)^1 + FV2/(1+.1)^2 +...+ FVn/(1+rate)^year