Question

CII, Inc., invests $630,000 in a project expected to earn a 12% annual rate of return. The earnings will be reinvested in the project each

Answer 1

$1,956,684

Step-by-step explanation:

As the project has a expected annual return, we have to calculate future value of this investment to find how much money Cll, Inc. will have after 10 years to reinvest.

We know,

FV = PV ×
`(1 + i)^(n)`

Given,

Present Value, PV = $630,000

Annual rate of return, i = 12% = 0.12

Number of period, n = 10 years

Putting the value into the above formula, we can get,

FV = $630,000 ×
`(1 + 0.12)^(10)`

FV = $630,000 × 3.105848

FV = $1,956,684

$1,956,684 can be reinvested after the liquidation of 10 years.