Final answer:
To finance a $100,000 plant expansion over 5 years at a 12% annual interest rate, the future value (amount to be financed) is approximately $338,635.42.
Step-by-step explanation:
To finance a $100,000 plant expansion over 5 years at a 12% annual interest rate, you can use the formula for the future value of an ordinary annuity:
FV = P * ((1 + r)n - 1) / r
Where:
- FV is the future value (amount to be financed)
- P is the periodic payment (annual payment)
- r is the interest rate per period (12% per year, so 0.12/12 = 0.01 per month)
- n is the number of periods (5 years, so 5*12 = 60 months)
Plugging in the values, we get:
FV = $100,000 * ((1 + 0.01)60 - 1) / 0.01
Simplifying the equation, we find that the future value (amount to be financed) is approximately $338,635.42.