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29 September, 05:45

The project steering committee is considering which project they should invest capital in. Mary's project promises to be worth $175,000 in 4 years. The steering committee is interest in Mary's project, but they would like to know the present value of the return if the interest rate is 6%. What is the value of Mary's project?

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  1. 29 September, 09:18
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    Use Present value formula since $175,000 expected in 4 years is a one-time cashflow.

    PV = FV / (1+r) ^t

    FV; future value = 175,000

    r = interest rate = 6%

    n = 4

    PV = 175,000 / (1+0.06) ^4

    PV = 175,000 / 1.06^4

    =175,000 / 1.262477

    = 138,616.39

    Therefore, the value of Mary's project is $138,616.39
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