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24 November, 20:42

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.

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  1. 24 November, 22:46
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    Present value of the benefits = $6,240,000

    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.
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