Answer to Question #115251 in Finance for Mohamed mokhtar

Question

The plant investment, expected to amount to $200 million, has been planned for 2017; however, it is delayed due to the economic downturn in construction. When the plant is completed and operating at full capacity, based upon the projected needs and cost per metric ton, it is possible that the plant could generate as much as $50,000,000 annually in revenue.
All analysis will use a planning horizon of 5 years commencing when the plant begins operation.
Delays beyond the anticipated implementation year of 2017 will require additional money to construct the factory. Assuming that the cost of money is 10% per year, compound interest, draw the cash flow diagram and determine the following:

d) What is the equivalent future worth of the estimated revenues after 5 years at 10% per year?

Answer 1

d)$FV=A\times\frac{(1+r)^5-1}{r}=50\times\frac{(1+0.1)^5-1}{0.1}=305.255$