A manufacturing facility is planning a plant expansion that

A manufacturing facility is planning a plant expansion that is expected to cost $13 million. How much money must the company set aside now in a lump-sum investment to have $13 million available in 2 years? Capital funds earn interest at a rate of 4% per year, compounded continuously to Interest Factor tables $12,000,000 $11.763.000 $12.190,000 $11,078,000 $11.145.000 Lunk

Solution

Correct option is (1).

Present worth of money to set aside ($) = 13,000,000 x e^-rt = 13,000,000 x e^{-(0.04 x 2)} = 13,000,000 x e^-0.08

= 13,000,000 x 0.9231

= 12,000,000