Question

TheTerraMaxtruck currently being manufactured and field tested by Oshkosh Truck Co. is a driver- less truck intended for military use. Such a truck would free personnel for non-driving tasks such as reading maps, scanning for roadside bombs, or scouting for the enemy. If such trucks would result in reduced injuries to military personnel amount- ing to $15 million three years from now, determine the present worth of these benefits at an interest rate of 10% per year compounded semiannually.

Answer 1

Present value of the benefits = $6,240,000

Step-by-step explanation:

Annual interest Rate given = 10%

Semi-annual Interest Rate = 10%/2 = 5%

Df @ 5% for 6 semi-annuals : (1+r/2) ^-m * n

= (1+ 0.05)^- 18

= 0.416

Present Value of the benefits= 0.416 x $15,000,000

= $6,240,000

Hence, the present value of the benefits of this saving is $6,240,000.