The private firm TranspCom needs to invest $300 million to a freeway construction and management project on year 2, and $50 million less than previous year each year from year 3 through year 6. What is the present worth of all these potential investments? (Suppose the annual rate of return is 12%)

Question
Asked Oct 17, 2019

The private firm TranspCom needs to invest $300 million to a freeway construction and management project on year 2, and $50 million less than previous year each year from year 3 through year 6. What is the present worth of all these potential investments? (Suppose the annual rate of return is 12%)

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Calculation of present worth of all potential investments:

Answer:

The present worth of all th...

Discounted investment in $
$0.00
S0.00
$239.16
Investment (S millions)
PV factor@12%
Year
0
1
0.8929
0.7972
0.7118
0.6355
0.5674
0.5066
0
1
2
$300
3
$250
$177.95
$127.10
4
$200
5
$85.11
$50.66
$679.98
$150
$100
Total present worth of all potential investments (S in millions)
O
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Discounted investment in $ $0.00 S0.00 $239.16 Investment (S millions) PV factor@12% Year 0 1 0.8929 0.7972 0.7118 0.6355 0.5674 0.5066 0 1 2 $300 3 $250 $177.95 $127.10 4 $200 5 $85.11 $50.66 $679.98 $150 $100 Total present worth of all potential investments (S in millions) O

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