Cheryl Peck purchased a computer network for her classroom. The computer network cost $100,000. She estimates that she can charge $500 for one session in the classroom. Cheryl knows that enrollment will increase over time. She estimates 50 students the first year, 75 students the second year, 100 students the third year, and 150 students the fourth year. If her cost of capital is 12 percent, what is the approximate present value of the benefits?

Question

Quizplus · Accepted Answer

The present value of the benefits can be calculated using the formula for present value, taking into account the number of students each year, the charge per session, and the cost of capital (discount rate). For each year, calculate the revenue (number of students * charge per session) and then discount it back to present value using the formula PV = FV / (1 + r)^n, where PV is the present value, FV is the future value (revenue for the year), r is the discount rate (12% or 0.12), and n is the year number. Summing these values gives the total present value of the benefits.

Cheryl Peck Purchased a Computer Network for Her Classroom