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# Calculating Future, Present and Annual Worth

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Use the following cash flow for the problem:
i) In year 0 you paid \$50000 for a machine
ii) In years 1 through 5 you made \$10000 per year from the machine
iii) In year 3 you had to pay an additional \$10000 to keep the machine going
iv) In year 5 you sold the machine for \$20000

a. Draw the cash flow diagram for this problem.
b. Calculate the Present Worth (PW) at 10% interest.
c. Calculate the Future Worth (FW) at 10% interest.
e. Calculate the Annual Worth (AW) at 10% interest.
f. What is the payback period?
g. Does the payback period and the PW, FW, and AW make sense?
h. Is this a viable project?

https://brainmass.com/economics/cost-benefit-analysis/calculating-future-present-annual-worth-600584

#### Solution Preview

Please refer to attached file for the solution.

a. Draw the cash flow diagram for this problem.

(see attached file for chart)

b. Calculate the Present Worth (PW) at 10% interest.

Year,n Cash inflow (CI) Cash Outflow (Co) Net Cash Flow (Cn) PV=Cn/(1+10%)^n
0 -50000 -50000 -50000.00
1 10000 10000 9090.91
2 10000 10000 8264.46
3 10000 -10000 0 0.00
4 10000 10000 6830.13
5 30000 30000 18627.64
PW -7186.85

c. Calculate the Future Worth (FW) at 10% interest.

Year,n Cash inflow ...

#### Solution Summary

The following solution depicts the steps to estimate PW, FW and Annual Worth in the given case.

\$2.19