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A band is considering the purchase of new amplifiers for its upcoming tour. The bands...

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Finance

A band is considering the purchase of new amplifiers for its upcoming tour. The bands manager tells them the amplifiers would cost $79400 in total and only last for the next 2 years while they tour North America and Europe. The band assumes the equipment will be too smashed up to have any value thereafter. The sound quality improvement is expected to increase concert revenues by $39600 in the first year and $43600 in the second year. The manager uses a 20% cost of capital. What is the present value of the first years revenue bump?

$33000

$36333

$39600

$79400

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