A privately run, for-profit, prison is considering ways in which it can cut its monthly costs and therefore increase profit. One idea it is considering is to pay a judge to guarantee convicted prisoners in poor health win their appeals and are set free. The prison believes it can realize the monthly cost savings below over the initial year of the plan. What is the present value of the first year's monthly cost savings?

Month	Savings ($)
1	3,500
2	6,000
3	6,500
4	9,000
5	9,000
6	9,000
7	9,400
8	9,800
9	4,800
10	5,000
11	2,000
12	3,500
Total	77,500

Assume a discount rate of 8%. Show both written and excel solutions.

Answer rating: 100% (QA)

Month Savings PVF 8 PV of Savings 1 3500 0925925926 32407407 2 6000 085733882 51440329 ... View the full answer