6. What is the equivalent value, twelve months from now, of the cash available to fund the expansion? Show your calculations.
7. Twelve months from now, what is the total of the value of the required cash payments? Show your calculations.
8. Twelve months from now, what is the difference between the value of the funds available from (6), and the total present value of the required payments determined in (7)? Show your calculations.
9. What is the accumulated value of this difference at the end of the expansion period? Show your calculations
ANSWERS:
6. =$2,737,859.32- This is the FV of $2,600,000 one year from now. Use this formula to get this:
FV=PV[1 + R]^N=FV OF $1 TODAY.
7.Since the PV of all the cash payments inculding the 10% increase in the last payment is=$2,579,689.61. Twelve months from now, it will be worth=$2,697,081.61. Use the exact same formula above.
8. $2,737,859.32 - $2,697,081.61=$40,777.71
9. The accumulated value of this difference will be=$52,797.30. Use the exact same formula above.