Project 1 Project 2 Project 3 Project 40,000 Initial Cost $40,000 $70,000 $100,000 $50,000 Annual Cash Flow 8,000 13,000 18,000 10,000 Life, Years 10 10 10 10
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We need a discount rate to do this. Let's assume a discount rate of 10%. The present worth (PW) formula is: $PW = -I + A \frac{(1+i)^n - 1}{i(1+i)^n}$ Where: * $I$ = Initial Cost * $A$ = Annual Cash Flow * $i$ = Discount Rate (as a decimal) * $n$ = Life in Show more…
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