Question
In: Finance
Your firm is concerned about a financial obligation of $19 million coming due in 8 years....
Your firm is concerned about a financial obligation of $19 million coming due in 8 years. If your firm could earn 6.5% APR on an investment, how much would your firm have to invest today to fund (finance) the future $19 million obligation? (In other words, what is the PV of $19 M due 8 years from now if the interest rate is 6.5%?) Assume annual compounding. Answer in units of millions of dollars and to 2 decimal points. (eg. $19.12 )
Solutions
Expert Solution
PV = FV / (1 + r)^t
PV = $19 million / (1 + 0.065)^8
PV = $11.48 million
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