An extra tractor will lead to an increase in revenue for a f

An extra tractor will lead to an increase in revenue for a farmer in successive
years of £500, £4000, £3,000, £3,000 and £1,000, after which the tractor is sold
for £1,000. Assuming that the first revenue is treated as current and the interest
rate is 8 per cent, what is the present value of the extra income stream?

Solution

As an extra tractor lead to an increase in revenue for a farmer in successive
years of £500, £4000, £3,000, £3,000 and £1,000, after which the tractor is sold
for £1,000. Assuming that the first revenue is treated as current and the interest
rate is 8 per cent, the present value of the extra income stream is £1800.