Question

A company recently expanded their assembly operations at a cost of $140,000. Management expects that the investment will grow at a rate of 14% per year compounded annually for the next 5 years. Find the future value of the investment. Then find the present value of that amount at a rate of 6% per year compounded annually Click here to view periods 1.25 of the present value of a dollar table Click here to view periods 26-49 of the present value of a dollar table Click here to view the compound interest table What is the future value of the investment? $ (Round to the nearest cent as needed.) What is the present value of that future value? $ (Round to the nearest cent as needed.) Enter your answer in each of the answer boxes

Answer 1

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We Know, A= P*(1+i)^n
Solution for Future value of investment:
A= ?
P=	440,000.00
i= 14%=	0.14
n=	5
A=	440000*(1+0.14)^5
A=	440000*(1.14)^5
A=	440000*1.9254145824
A=	847,182.42
So Future value of investment is $ 847,182.42.
Solution for Present value of Future value:
A=	847,182.42
P=	?
i= 6%=	0.06
n=	5
847,182.42=	P*(1+0.06)^5
847,182.42=	P*(1.06)^5
847,182.42=	P*1.3382255776
847,182.42/1.3382255776=	P
P=	633,063.99
So Present value of Future value is $ 633,063.99.