Problem
\$180,000 was spent on the project that yields annual benefit of \$60,000 for a period of 8 years without any salvage value. Determine the benefit-to-cost ratio considering the cost of money to be 7%.
| A. 1.99 | C. 1.57 |
| B. 2.21 | D. 2.63 |
Present Amount
Compound Interest
In compound interest, the interest earned by the principal at the end of each interest period (compounding period) is added to the principal. The sum (principal + interest) will earn another interest in the next compounding period.
Consider \$1000 invested in an account of 10% per year for 3 years. The figures below shows the contrast between simple interest and compound interest.
- Read more about Compound Interest
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