A machine produces no benefits now, but $200 in benefits at the end of a year. At the end of the year it falls apart into a heap of dust never to be used again. The present value of its income stream is approximately

Question

Quizplus · Accepted Answer

To calculate the present value of the income stream, we can use the formula PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods. In this case, the FV is $200, n is 1, and we are given that the machine produces no benefits now, so it has no present value. Therefore, the present value is simply $200 / (1 + 0.1)^1 = $182.

A Machine Produces No Benefits Now, but $200 in Benefits