Question

7. Huntington Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $12.4 million. The CEO of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for the entire construction project. Management has decided to save $235,000 a month for this purpose. The firm earns 7 percent compounded monthly on the funds it saves. How long does the company have to wait before expanding its operations?

Answer 1

Using financial calculator

PMT=-235000

I/Y=7%/12

PV=0

FV=12400000

CPT N=46.14

It will take 46.14 months or 3.845 years