Question

A company recently expanded their assembly operations at a cost of $420000 management expects that the investment will grow at a rate of 12% per year compounded annually for the next 5 years find the future value of the investment then find the present value of the amount at a rate of 6% per year compound annually

Answer 1

Future Value = $740183.51

Present Value = $562054.74

`F=PV(1+I)^n`

PV = 420000

I = 6

n = 5

`F=420000(1+(12)/(100))^5`
`F=740183.51`

The future value is $740183.51

`A=P(1+(r)/(100))^n`

P = 420000

r = 6

n = 5

`A=420000(1+(6)/(100))^5`
`A=562054.74`

The present value would be $562054.74