|Posted: 12 May 2010 at 09:32 | IP Logged
I am getting confused as to when to use PV of an annuity of 1 @ XX% for XX years VS when to use PV of 1 due in XX years at XX%.
Para Co. is reviewing the following data relating to an energy saving investment proposal:
Cost - $50000
Residual Value at the end of 5 years - $10000
PV of an annuity of 1 at 12% for 5 years - 3.60
PV of 1 due in 5 years at 12% - 0.57
What would be the annual savings needed to make the investment realize 12% yield?
Correct Ans: $12,306. Other answeer choices $8189, $11111 and $13889.