Ch 11A Homework ezto.mheduca 400 points Fraser Company wil nee d a new warehouse

Question

Ch 11A Homework ezto.mheduca 400 points Fraser Company wil nee d a new warehouse in four years. The warehouse will cost $350,000 to build Click here to vtew Exhibit 118-1 and Exhibit 11B.2, to determine the appropriate discount factorís) using tables Required: 1. What lump-sum amount should the company invest now to have the $350,000 available at the end of the four-year period? Assume that the company can invest money at fve percent (Use the appropriate table to detérimine the discount lactorts).) 2. What lump-sum amount should the company invest now to have the $350,000 available at the end of the four-year period? Assume that the company can invest money at eleven percent (Use the appropriate table to determine the discount factor(s)) Amount to be Invested entDiscount FactorPresent Value Type here to search TOSHIBA

Explanation / Answer

Question No. 1

Answer to Part 1.

Value of Investment = Future Value = $350,000
Rate of Return = 5%
Present Value of Investment = Future Value * PVF (r, n years)
Present Value of Investment = 350,000 * PVF (5%, 4 years)
Present Value of Investment = 350,000 * 0.8227
Present Value of Investment = $287,945

Answer to Part 2.

Value of Investment = Future Value = $350,000
Rate of Return = 11%
Present Value of Investment = Future Value * PVF (r, n years)
Present Value of Investment = 350,000 * PVF (11%, 4 years)
Present Value of Investment = 350,000 * 0.6587
Present Value of Investment = $230,545

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