Question
In: Finance
(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. | |||||||||||
Solutions
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 | |||
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