A business has $35,000 available to invest. Use a PW analysis. MARR = 6% Life =
ID: 1205225 • Letter: A
Question
A business has $35,000 available to invest. Use a PW analysis. MARR = 6% Life = 3 years. Investment A: Initial investment = $22,500. Is expected to produce a MONTHLY revenue of $1,100 Investment B: Initial investment = $15,000. Is expected to produce a MONTHLY revenue of $1,000 Investment C: Initial investment = $11,000. Is expected to produce a MONTHLY revenue of $750 How many bundles are there that do not exceed the maximum expenditure amount in initial investments? Enter a whole number only. For example: X or XY Use the same information from the previous problem. Find the PW of each bundle that had an initial investment less than the maximum expenditure allow Add up all the PW values you just found and report the number as your answer. Round your answer to the nearest thousand. The units are assumed to be money, so DO NOT enter a $. However, DO enter a comma. For example, your answer should be something like: XY,000 or XYZ,000Explanation / Answer
(1)
Monthly MARR = 6% / 12 = 0.5% per month
Number of months = 3 x 12 = 36
PW, inv A ($) = - 22,500 + 1,100 x PVIFA(0.5%, 36) = - 22,500 + 1,100 x 32.8710
= - 22,500 + 36,158 = 13,658
PW, Inv B ($) = - 15,000 + 1,000 x PVIFA(0.5%, 36) = - 15,000 + 1,000 x 32.8710
= - 15,000 + 32,871 = 17,871
PW, Inv C ($) = - 11,000 + 750 x PVIFA(0.5%, 36) = - 15,000 + 750 x 32.8710 = - 11,000 + 24,653
= 13,653
B has highest PW, followed by A & C.
B requires $15,000. Remaining budget = $(35,000 - 15,000) = $20,000
Only C can be chosen with this budget.
Bundle (A + C) = $26,000
Bundle (B + C) = $33,500
So, there are only 2 bundles not exceeding $35,000.
(2)
PW, Bundle (A + C) ($) = 13,658 + 13,653 = 27,311
PW, Bundle (B + C) ($) = 17,871 + 13,653 = 31,524
Total PW ($) = 27,311 + 31,524 = 58,835
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