5 years from now you expect to make a capital investment wor

5 years from now, you expect to make a capital investment worth 67,536 at that time. How much will that investment cost 2 years from now if the TOM is 11% per ye

Solution

5 years from now, you expect a capital investment worth 67, 536 at that time. How much will that investment cost 2 years from now if the YVOM is 11% per year?

Present Worth of 67,536 at the end of 2^nd year = 67,536 (1.11)^-3 = 49,382

OR

Present Worth of the investment now = 67,536 (1.11)^-5 = 40,079

Future worth of this amount at 2^nd year = 40,079 (1.11)² = 49,382

The investment at the end of 2^nd year cost at the 2^nd year = 49,382