A privately run, for-profit, prison is considering ways in which it can cut its monthly costs and therefore increase profit. One idea it is considering is to pay a judge to guarantee convicted prisoners in poor health win their appeals and are set free. The prison believes it can realize the monthly cost savings below over the initial year of the plan. What is the present value of the first year's monthly cost savings? Month Savings ($) 1 3,500 2 6,000 3 6,500 4 9,000 5 9,000 6 9,000 7 9,400 8 9,800 9 4,800 10 5,000 11 2,000 12 3,500 Total 77,500 Assume a discount rate of 8%. Show both written and excel solutions.
A privately run, for-profit, prison is considering ways in which it can cut its monthly costs and therefore increase profit. One idea it is considering is to pay a judge to guarantee convicted prisoners in poor health win their appeals and are set free. The prison believes it can realize the monthly cost savings below over the initial year of the plan. What is the present value of the first year's monthly cost savings? Month Savings ($) 1 3,500 2 6,000 3 6,500 4 9,000 5 9,000 6 9,000 7 9,400 8 9,800 9 4,800 10 5,000 11 2,000 12 3,500 Total 77,500 Assume a discount rate of 8%. Show both written and excel solutions.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...
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A privately run, for-profit, prison is considering ways in which it can cut its monthly costs and therefore increase profit. One idea it is considering is to pay a judge to guarantee convicted prisoners in poor health win their appeals and are set free. The prison believes it can realize the monthly cost savings below over the initial year of the plan. What is the present value of the first year's monthly cost savings?
Month | Savings ($) |
1 | 3,500 |
2 | 6,000 |
3 | 6,500 |
4 | 9,000 |
5 | 9,000 |
6 | 9,000 |
7 | 9,400 |
8 | 9,800 |
9 | 4,800 |
10 | 5,000 |
11 | 2,000 |
12 | 3,500 |
Total | 77,500 |
Assume a discount rate of 8%. Show both written and excel solutions.
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