I am supposed to assume that the actual cash inflows turn out to be $91,000 per year versus the real value calculated which was 100,000. Determine the amount of Mr. Holt's bonus if the original computation of net present value were based on $90,000 versus $70,000. This is the question I need help with.
You'll need a present-value table in order to calculate these values, but you can find those online and in textbooks:
Cash inflows (b) $91,000 / $90,000 / $70,000
Present value (a x b) 344,961.62 / 341,170.83 / 265,355.09
Cost of investment -250,000.00 / -250,000.00 / -250,000.00
Net present value 94,961.92 / 91,170.83 / 15,355.09
Net Projected Value 94,961.92 / 94,961.92
Bonus 379.11 7,960.68
May 25th, 2015
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