The following data was compiled for Infer-Tech PC Company in order to assess the effect of a $500,000 initial investment with a $70,000 operating cost increase per year over a five year period.The company factored in a 15% required rate of return.

Required
Compute the present value of the investment in year 2 and year 4.
A)$132,444;$85,669
B)$120,522;$72,996
C)$115,669;$85,000
D)$128,544;$97,198
E)$105,008;$80,663

Question

The following data was compiled for Infer-Tech PC Company in order to assess the effect of a $500,000 initial investment with a $70,000 operating cost increase per year over a five year period.The company factored in a 15% required rate of return.

Required
Compute the present value of the investment in year 2 and year 4.

Required
Compute the present value of the investment in year 2 and year 4.
A)$132,444;$85,669 
B)$120,522;$72,996 
C)$115,669;$85,000 
D)$128,544;$97,198 
E)$105,008;$80,663

Quizplus · Accepted Answer

D)[$170,000 × ($1.00/$1.15²)] = $128,544 [($170,000 × ($1.00/$1.15⁴)] = $97,198

The Following Data Was Compiled for Infer-Tech PC Company in Order