Calculating the present worth of an item

[gregnola]

I am studying to take the PE examination and it has been MANY years since I went to school. I purchase one of the study guides from the ncees and there is a question on calculating the present worth of an investment.

Can someone help me understand the question and answer?
Thank you in advance.

The question and answer are as follows:

A computing system costing $50,000 is installed initially. A second computer is installed 2 years later at a cost of $50,000. Each unit requires a maintenance cost of $10,000/year of operation.
The computers have zero salvage.
Assume a 10% rate of return and a 10% interest rate.
What is the present worth of the investment and maintenance cost for the first 4 years?

The answer is
PW = 50,000[1+ (p/f)10%,2] + 20,000(p/a)10%,4 -10,000(p/a)10%,2 = 137,365

Could some break down step by step in detail the answer to this problem. Please identify each component in simple terms

 

[owg]

1. Present Worth is also known as Net Present Value (NPV).
2. Look up NPV in Excel Help.
3. Look up NPV on Google.

HAZOP at

http://www.curryhydrocarbons.ca

 

[azdback]

The total 4-year out of pocket expense is $160K for installs and maintenance. Discounted at 10%, the present value of this expense is $137,365

FV Actual Cost PV Cost
Y0 = 50,000 50,000.00
Y1 = 10,000 9090.91
Y2 = 60,000 49,586.78
Y3 = 20,000 15,026.30
Y4 = 20,000 13,660.27
Total 160,000 137,364.25

PV = FV/(1+rate)^year

PV = 50,000 + FV1/(1+.1)^1 + FV2/(1+.1)^2 +...+ FVn/(1+rate)^year