onghorn Fabricators Inc. plans to expand its metals-forming facility over the next 5 years. The company will add 20,000 square feet to its 100,000-square-foot plant as it adds robotic welding units, additional laser technology, and automated loading facilities. Construction at the plant is expected to start by the end of next year. The company expects to pay 5 equal payments of $250,000 every 12 months over the 5 year period. What is the future value of the total improvement cost, if the interest rate is 18% per year, compounded every 12 months?

Question

Biscuit

Business

9 July, 18:07

onghorn Fabricators Inc. plans to expand its metals-forming facility over the next 5 years. The company will add 20,000 square feet to its 100,000-square-foot plant as it adds robotic welding units, additional laser technology, and automated loading facilities. Construction at the plant is expected to start by the end of next year. The company expects to pay 5 equal payments of $250,000 every 12 months over the 5 year period. What is the future value of the total improvement cost, if the interest rate is 18% per year, compounded every 12 months?

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Answers (1)

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Kristin · Answer 1

Future value of total improvement cost = $1,788,552.44

Explanation:

As per the data given in the question,

Regular deposit amount = $250,000

No. of period = 5 years

Interest rate = 18%

Future value = Regular deposit amount * [ ((1+interest rate per period) ^no. of period - 1) : interest rate per period]

Face value = $250,000*[ ((1+0.18) ^5-1) : 0.18]

= $250,000*7.154

= $1,788,552.44

Future value of total improvement cost = $1,788,552.44