Question

Imagineering, Inc. is considering an investment in CAD-CAM compatible design software with the cash flow profile shown in the table below. Imagineering's MARR is 18 percent/year. Using excel: a. What is the annual worth of this investment? EOY 0 1 2 3 4 5 6 7 Cash Flow (M$) -$12 -$1 $5 $2 $5 $5 $2 $5

Answer 1

The annual worth of the investment is approximately $8.327 million.

Step-by-step explanation:

To determine the annual worth of the investment, we need to calculate the present value of the cash flows using the MARR of 18 percent/year.

The present value can be calculated using the formula:

PV = CF1/(1 + r) + CF2/(1 + r)^2 + CF3/(1 + r)^3 + ... + CFn/(1 + r)^n

where PV is the present value, CF is the cash flow for each year, r is the MARR, and n is the number of years.

Using this formula, the annual worth of the investment is:

PV = -12/(1 + 0.18) + (-1)/(1 + 0.18)^1 + 5/(1 + 0.18)^2 + 2/(1 + 0.18)^3 + 5/(1 + 0.18)^4 + 5/(1 + 0.18)^5 + 2/(1 + 0.18)^6 + 5/(1 + 0.18)^7

After evaluating the above expression, the annual worth of the investment is approximately $8.327 million.