Find the present value for each year if the interest rate

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Reference no: EM13160547

Suppose that you have a chance to buy some new computer equipment and software that will add to your future profits. It will take a year to have the package designed to your needs, installed, tested and your personnel trained to use it. After that, it will add to your profits for the following 5 years until you expect to change your hardware over again. The project is expected to make you:

Year	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Increase in Profits	0.00	1,000,000	2,000,000	2,000,000	1,000,000	1,000,000
Present Value

Notice that the project will increase your profits a total of $7 million dollars, BUT that benefit is spread over a 6 year period while the cost is paid now. Find the present value for each year if the interest rate is 6% and then add them together for the total present value of future revenue.

Total PV = ?

If the price of the software is $5 million is it profitable to buy the software?

Reference no: EM13160547

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