You will receive annual payments of $800 at the end of each year for 12 years. The first payment will be received three years from today. What is the present value of these payments if the discount rate is 7 percent

= $5,839.92

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator

Cash flow each year from year 0 to 2 = 0

Cash flow each year from year 3 to 15 = $800

I = 7%

Present value = $5,839.92

To find the PV using a financial calacutor:

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

I hope my answer helps you

Solution:

Let the size of old plant be x

New plant is 33% bigger than the old plant.

So,

Size of the new plant

= x + 0.33x = 1.33x

Cost of the old plant = $8 million

Capacity exponent = 0.90

Calculate the cost of new plant -

Cost of new plant = Cost of old plant * (Size of new plant/Size of old plant)capacity exponent

Cost of new plant =

Cost of new plant = = $10.34 million

Thus,

The cost of building new plant is $10.34 million.