Question

CGK Rheosystems makes high-performance rotational viscometers capable of steady shear and yield stress testing in a rugged, compact footprint. How much could the company afford to spend now on new equipment in lieu of spending $235,000 one year from now and $355,000 three years from now, if the company uses an interest rate of 15% per year?

Answer 1

$437766.0885

Step-by-step explanation:

You are required to find how much the company can spend now on new equipment based on spending.

$235,000 one year from now

$355,000 3 years from now

Interest rate = 15% per year

P = $235000(p/f,15%,1) + $355,000(p/f,15%,3)

= 235,000x1.15^-1 + 355000x1.15^-3

= 204,347.826 +233418.2625

= $437766.0885

This is the amount that the company would afford to spend.