Question

A low-cost noncontact temperature measuring tool may be able to identify railroad car wheels that are in need of repair long before a costly structural failure occurs. If the BNF railroad saves $63,723 in year 1, and starting year 2, the amounts increasing by $14,768 each year for 5 years, what is the present worth of the savings in year 0 at an interest rate of 10% per year

Answer 1

$420,546.12

Step-by-step explanation:

Present worth is the sum of discounted cash flows

Present worth can be calculated using a financial calculator

Cash flow in year 1 =

Cash flow in year 2 = 78491

Cash flow in year 3 =93259

Cash flow in year 4 =108027

Cash flow in year 5=122795

Cash flow in year 6 =137563

I = 10%

PW = $420,546.12

To find the PW using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute