Question
In: Finance
You are interested in investing in a new business in 5 years time that has a...
You are interested in investing in a new business in 5 years time that has a total cost of $10 million. The schedule of payments for the business comprise; $500 000 today, $2 million at the end of year 2 and the remainder at the end of year 5.
To pay for the new business you have access to the following savings; $3.8 million today and $3 million in 3 years time. On any savings you can earn 10% p.a. compounded half-yearly in an account with the Wacpac Bank. You want to pay for any shortfall in savings for the investment by depositing an equal annual end of year amount into the Wacpac Bank account over the next 5 years.
Required:
(1) What is the approximate effective interest rate earned on your savings?
(2) What is the approximate present value today of the total payments required for the new business?
(3) What is the approximate annual end of year amount required to meet the new business schedule of payments?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
You are interested in investing in a new business in 5 years time that has a...
You are interested in investing in a new business in 5 years
time that has a total cost of $10 million. The schedule of payments
for the business comprise; $500 000 today, $2 million at the end of
year 2 and the remainder at the end of year 5.
To pay for the new business you have access to the following
savings; $3.8 million today and $3 million in 3 years time. On any
savings you can earn 10% p.a....
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The statement of financial position is shown below:
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