Question

12.Transverse Crane Service will obtain a bonus at the end of a multi-year project if the job is completed on time. This bonus will amount to $100,000 or a bridge general maintenance project across the Hudson River. The company has the following investments and cash draws on the 9-year project: They invested $2,000,000 at the start of the project to cover expected costs. In year 2 they expect to withdraw $6,000,00. In year 3, they will receive a partial payment for $800,000. In year 5, they will have to withdraw $900,000, In year 6, they will need to withdraw $400,000, and in year 8 they will receive a payment of $1,800,000. The project will end in year 9 with no additional costs. How much will be in the account with an interest rate of 3%.

Answer 1

Given : interest rate = 3%

= 0.03

Investment at the starting of the project = $2,000,000

Value of money at the end of year
`$2$` =
`$2000000 * (1.03)^2 - 600000 = 1,521,800$`

Value at money the end of year
`$3$` =
`$1521800 * 1.03 + 800000 = 2,367,454$`

Value at money the end of year
`$5$` =
`$2367454 * (1.03)^2-900000=1,611,631.949$`

Value at money the end of year
`$6$` =
`$1611631.949 * 1.03 - 400000=1,259,980.91$`

Value at money the end of year
`$8$` =
`$1259980.91 * (1.03)^2 +1800000=3,136,713.74$`

Value at money the end of year
`$9$` =
`$3136713.74 * 1.03 + 100000=3,330,815.16$`