Barney\'s Liquids and Aunt Bee\'s Lemonade plan to expand their international pa

Question

Barney's Liquids and Aunt Bee's Lemonade plan to expand their international partnership for the marketing and distribution of ready-to-drink tea products by adding 11 countries to their current markets. If the agreement is reached, operations are expected to begin 2 years from now. The snack and beverage company forecasts that the agreement will bring additional revenue of $400 thousand in the first year of the operation (i.e., the end of year 3), with amounts increasing by $12.5 thousand each year for the next 7 years. What is the present value now (t =0) of the total revenue if the interest rate of 17% per year? specify answer to nearest cent. The answer should be 1,332,965.26

Explanation / Answer

PV = 400,000/1.17^3 + 412.5/1.17^4 + 425/1.17^5 + ... 487.5/1.17^10 = $1,332,965.26

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