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Calculating Net Present Worth

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

Solution Summary

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

$2.19