Your company will generate $63,000 in annual revenue each year for the next seven years from a new information database. If the appropriate discount rate is 7.50 percent, what is the present value of the savings?

To find the present value (PV) of the savings, we can use the formula for the present value of an annuity because the company will generate $63,000 per year for 7 years. The formula for the present value of an annuity is:

\[
PV = P \times \frac{1 - (1 + r)^{-n}}{r}
\]

Where:
- $P$ is the annual payment ($63,000)
- $r$ is the discount rate (7.50% or 0.075)
- $n$ is the number of years (7)

Now, we can calculate the present value.

\[
PV = 63,000 \times \frac{1 - (1 + 0.075)^{-7}}{0.075}
\]

Let's compute this.The present value of the annual savings of $63,000 over 7 years, with a discount rate of 7.50%, is approximately **$333,685.88**.

Do you want more details or have any questions?

Here are some related questions you might find interesting:
1. What if the discount rate was 5% instead of 7.50%?
2. How would the present value change if the revenue lasts for 10 years?
3. What is the difference between present value and future value?
4. How does changing the frequency of payments (e.g., quarterly instead of yearly) affect the present value?
5. How would inflation impact the calculation of the present value?

**Tip:** The higher the discount rate, the lower the present value of future cash flows.

Calculate the present value of $63,000 in annual revenue over 7 years with a 7.50% discount rate. This problem demonstrates how to use the present value of annuity formula to account for the time value of money. Suitable for finance or economics students at an undergraduate level.

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