Chief Candace Miller of Jefferson City police department has submitted a proposal to the city's budget director
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Question:
Chief Candace Miller of Jefferson City police department has submitted a proposal to the city's budget director requesting the purchase of ten new police cars. She estimates the department will save $20,000.00 a year by having the new cars. The cars will cost the city $200,000.00. Unfortunately, the life span of a police car is only four years at best.Using a 7% discount rate, calculate the net present value of the proposal. Explain the results.
| Discount rate = | |||
| Cost of cars = | |||
| Annual Savings = | |||
| Life span = | |||
| NPV = Annual Savings / (1+r) = | |||
| YEAR | SAVINGS | NPV | 7% D.R. |
| 1 | |||
| 2 | |||
| 3 | |||
| 4 | |||
| 5 | |||
| $0.00 | $0.00 | ||
| Amount Invested = | |||
| Total Present Value of Savings = | $0.00 | ||
| Total Present Value of Annual Savings = | $0.00 | ||
| Net Present Value (NPV) = | |||
| Explanation: | |||
Expert Answer:
To calculate the net present value NPV of the proposal well discount the annual savings over the fou... View the full answer
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