Annual Savings $7,900

Initial Investment $21,750

Discount Rate 5%

TIMELINE METHOD
time 0 1 2 3
Investment -21750
Savings 7900 7900 7900
PV -21750 7523.81 7165.533 6824.317
NPV of project -236.340568

Since the NPV is negative, this is not a good investment

FUNCTION METHOD

Investment -21750
PV of future Savings $21,513.66

NPV ($236.34)

Since the NPV is negative, this is not a good investment

 Discount Rate 4%

TIMELINE METHOD
Time (yrs) 65 66

Moving -50,000
Annual Expense -40,000 -40,000
PV(ay t=65) of annual expenses -40,000 -38461.538462
-565,358
a) Savings required at 65th year:

By timeline Method: $ 615,357.58

By Function Method PV of annual expenses

Moving expense

So, saving required

b) Savings worth today t=40

n=25

By Timeline method $ 230,830.97

By Function Method $230,830.97

c) Savings required each year

By Timeline method $ 14,775.94

By function Method $14,775.94

 67 68 69 70 71 72 73 74

-40,000 -40,000 -40,000 -40,000 -40,000 -40,000 -40,000 -40,000

-36982.25 -35559.854347 -34192.17 -32877.08 -31612.58 -30396.71 -29227.61 -28103.47

($565,357.58)
-50,000

$615,357.58
 75 76 77 78 79 80 81 82

-40,000 -40,000 -40,000 -40,000 -40,000 -40,000 -40,000 -40,000

-27022.57 -25983.24 -24983.88 -24023 -23099 -22210.58 -21356.33 -20534.93
 83 84

-40,000 -40,000
-19745.12 -18985.7