Corning Ceramics expects to spend 400000 to upgrade equipmen

Corning Ceramics expects to spend $400,000 to upgrade equipment two years from now. If the company wants to know the equivalent value now of the planned expenditure, identify the symbols and their values, assuming Coming\'s minimum attractive rate of return is 20% per year.

Solution

Future value (FV) = $400,000

n=2

interest rate (i/y) = 20%

Present value (PV) = 400,000/(1.20)^2 = $277,777.78