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(ii) Sonstraal Butchery intends to modernise its butchery machinery and equipment. The company anticipates that the...

(ii) Sonstraal Butchery intends to modernise its butchery machinery and equipment. The company anticipates that the modernisation will increase cash flows
by R200,000 four years from today, R350,000 five years from today, R360,000 six years from today, and R400,000 seven years from today.
Estimate the total future value of of these cash flows at the end of year seven using a 17% interest rate.

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Expert Solution

Calculation of  future value of of given cash flows at the end of year seven using a 17% interest rate:

Year Increase in Cash Flows Year left till 7 years Future Value Calculation Future Value
4                              2,00,000                                             3 200,000*1.17^3            3,20,322.60
5                              3,50,000                                             2 350,000*1.17^2            4,79,115.00
6                              3,60,000                                             1 360,000*1.17^1            4,21,200.00
7                              4,00,000                                           -   400,000*1.17^0            4,00,000.00
Future Value of the above cash flows at the end of year seven using 17% interest rate          16,20,637.60

jeff jeffy answered 1 year ago
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