Consider a piece of equipment for which the expenditure at the beginning of period 1 is $40,000. Given that this is a cost, consider it as a negative in a net revenue framework. The net revenue at the end of year 1 is $15,000. The net revenue at the end of year 2 is $20,000. The net revenue at the end of year 3 is $21,000. The net revenue at the end of year 4 is $25,000. This includes revenue from operations and sale of the used equipment. The interest rate is 6%. What is the net present value of this net revenue stream?

Consider a piece of equipment for which the expenditure at the beginning of period 1 is $40,000. Given that this is a cost, consider it as a negative in a net revenue framework. The net revenue at the end of year 1 is $15,000. The net revenue at the end of year 2 is $20,000. The net revenue at the end of year 3 is $21,000. The net revenue at the end of year 4 is $25,000. This includes revenue from operations and sale of the used equipment. The interest rate is 6%. What is the net present value of this net revenue stream?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 2MC

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