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Calculating Net Present Worth

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Buying A Boat:

A Commercial Fisherman needs to purchase a new boat. He is considering three alternatives A, B & C. Boat A costs $200,000. and is expected to produce net revenues of $50,000 per year. Boat B costs $290,000 and is expected to produce net revenues of $75,000 per year. Boat C costs $225,000 and is expected to produce revenues of $60,000 per year. Salvage value at the end of the five year life of each boat is estimated to be $25,000. The fisherman's minimum attractive rate of return is 6%.

1. The Net Present Worth of Boat A is:
(Express your answer to 3 significant digits with trailing zeros as required: XXX00., or XXX0., or XXX. for positive present worth or -XXX00., -XXX0. or -XXX. for negative present worth)

2. The Net Present Worth of Boat B is:
(Express your answer to 3 significant digits with trailing zeros as required: XXX00., or XXX0., or XXX. for positive present worth or -XXX00., -XXX0. or -XXX. for negative present worth)

3. The Net Present Worth of Boat A is:
(Express your answer to 3 significant digits with trailing zeros as required: XXX00., or XXX0., or XXX. for positive present worth or -XXX00., -XXX0. or -XXX. for negative present worth)

4. What should the Fisherman do?
Buy Boat A
Buy Boat B
Buy Boat C
Do Nothing

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https://brainmass.com/economics/output-and-costs/calculating-net-present-worth-510562

Solution Summary

The expert calculates the net present worth for a commercial fisherman. The significant digits with trailing zeros required are given.

$2.19
See Also This Related BrainMass Solution

Calculating Future, Present and Annual Worth

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?

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