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Math Help - NPV of an Automobile Dealer

  1. #1
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    Question NPV of an Automobile Dealer

    See figure attached for the question.

    I have concerns regarding the way the question is worded.

    Does the company incur Revenue/O&M/Savings at the end of the 1st year,(i.e. immediately after the building is constructed) or at the end of the 2nd year?

    When I read the question I thought the Revenue/O&M/Savings would all begin to occur at the end of the 2nd year.

    Which is correct and why?


    Also, attached is my work for the NPV and RORC assuming the Revenue/O&M/Savings occur at the end of the 1st year.

    Could someone please clarify? I want to make sure I am able to extract the information from the questions correctly!

    \text{For Reference: }

    P = \text{Present Worth}

    F = \text{Future Worth}

    A = \text{Annuity}

    \text{Example of using the mnemomic expressions is below, }

    (\frac{A}{P}, i\%,N) \equiv \text{ A constant that when multiplied  with the present worth, will provide the equivalent annuity over N  peroids given a discount rate of i}\%

    \text{Similiarly for the other mnemomic expressions.}
    Attached Thumbnails Attached Thumbnails NPV of an Automobile Dealer-q-_0116_new.jpg   NPV of an Automobile Dealer-rsz_q-_0118.jpg  
    Last edited by jegues; October 11th 2012 at 03:37 PM.
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  2. #2
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