Yes, now that I look at it differently I think I was wrong before, and I (think I) can fix that now.
The price of the expansion will be 2.8 million, but management has 2.6 million right now.
Assuming "now" begins at the end of the statements made, 300,000 was transferred from management to the cost of the expansion, meaning management has 2.3 million dollars and the cost is now 2.5 million dollars.
6. 12 months from now, the 2.6*10^6 - 3*10^5 dollars will have grown to 2,300,000*1.045^2 = 2,511,657.5 dollars.
If I understand the question correctly, management has 2,511,657.5 dollars to fund the expansion.
7. Management already paid 300,000 from the start. But the payment plan requires 700,000 to be deducted from that at the end of year one. 300,000 + 700,000 = 1,000,000. This is how much management has been required to pay, so far. So, 2,511,657.5 - 700,000 = 1,811,657.5 is how much funding management has right now. And 2,500,000 minus the 700,000 payment is 1,800,000.
8. The difference between available funds and the expansion cost is now a positive 11,657.5.
Either 2,511,657.5 - 2,500,000 or 1,811,657.5 - 1,800,000 will give you this value.
9. And by applying interest to that, at the end of the expansion plan is 11,657.5 * 1.05^4 * 1.055^2 = 15,771.30
I'm not totally sure this is right because I might misunderstand the questions, and check my work.
Sorry it took so long.
I hope this helps, NeedSupply.
