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Your company will generate $47,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 7.1 percent, what is the present value of the savings?

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Answer:

The answer is $252415.91

Explanation:

Solution

Now

A step bu step solution is provided below in showing the present value of the savings

Given that:

Year        Annual Revenues          Calculations           Present value

1                   $47000                    $47000 / (1.071)^1         $43884.22

2                   $47000                   $47000 / (1.071)^2        $40975

3                  $47000                   $47000 / (1.071)^3        $38258.63

4                  $47000                   $47000 / (1.071)^4        $35722.35

5                 $47000                   $47000 / (1.071)^5        $33354.2

6                  $47000                   $47000 / (1.071)^6        $31143.04

7                  $47000                   $47000 / (1.071)^7         $29078.47

Total present value                                                        $252415.91

Hence the current or present value of the savings is $252415.91

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