Question
Coastal Shipping is setting aside capital to fund an expansion project. Funds earmarked for the project will accumulate at the rate of $50 000 per
Coastal Shipping is setting aside capital to fund an expansion project. Funds earmarked for the project will accumulate at the rate of $50 000 per month until the project is completed in two years. Once the project starts, costs will be incurred at a rate of $150 000 per month over 24 months. Coastal currently has $250 000 saved. What is the minimum number of months it will have to wait before it can start if money is worth 18 percent nominal, compounded monthly? Assume that:
1. Cash flows are all at the end of months.
2. The first $50 000 savings occurs one month from today.
3. The first $150 000 payment occurs one month after the start of the project.
4. The project must start at the beginning of a month.
The answer is 27 months. Help me find out the solution for this.
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