Question

Your firm spends $ 5 comma 200 every month on printing and mailing​ costs, sending statements to customers. If the interest rate is  0.46 % per​ month, what is the present value of eliminating this cost by sending the statements​ electronically?

Answer 1

Answer:

The present value for eliminating this cost will be of $1,130,434.78

Explanation:

we solve for the present value of a perpetual annuity as this cost goes forever unless we change into electronically afterwich; they disappear entirely.

$\frac{C}{r} =PV$

$\frac{5,200}{0.46} = 1,130,434.78$