The table below shows the total present value of additional revenue from DVD players at Video Wizard,a business that rents audiovisual equipment.If the price of a DVD player is $450,what will be Video Wizard's total investment expenditure on cash registers?

Question

Quizplus · Accepted Answer

To find the total investment expenditure on cash registers, we need to add up the present values of the additional revenue for each year and then divide by the present value factor for a lump sum investment of $1.

Using the table, we can see that the total present value of additional revenue over 5 years is $11,250.

PV factor for a lump sum investment of $1 for 5 years at 8% is 0.68058.

Therefore, the investment expenditure on cash registers would be:
$11,250 / 0.68058 = $16,528.52

However, the question asks for the investment expenditure in terms of the cost of a DVD player, which is $450.

So we divide the investment expenditure by the cost of a DVD player: 
$16,528.52 / $450 = $36.73004

Rounding to the nearest cent, the answer is $36.73 per DVD player.

To find the total investment expenditure for all DVD players, we multiply by the number of DVD players: 
$36.73 x 49 = $1,800.77

Rounding to the nearest dollar, the answer is $1,800.00, which corresponds to choice (B).

The Table Below Shows the Total Present Value of Additional