A company expects revenue of 100000 in year 1 80000 in year

A company expects revenue of $100,000 in year 1, $80,000 in year 2 abd amounts decreasing by $20,000 per year thereafter. If the company’s MARR is 10% per year, what is the future worth of the revenue through the end of year 5?

Solution

ANSWER:

i =10%

Future worth of revenue = revenue in 1st year(f/p,i,n) + revenue in 2nd year(f/p,i,n) + revenue in 3rd year(f/p,i,n) + revenue in 4th year(f/p,i,n) + revenue in 5th year

fw of revenue = 100,000(f/p,10%,4) + 80,000(f/p,10%,3) + 60,000(f/p,10%,2) + 40,000(f/p,10%,1) + 20,000

fw of revenue = 100,000 * 1.464 + 80,000 * 1.331 + 60,000 * 1.21 + 40,000 * 1.1 + 20,000

fw of revenue = 146,400 + 106,480 + 72,600 + 44,000 + 20,000 = $389,480

so the future value is $389,480