Jonathan Corp. has discovered an investment opportunity that earns 8% interest compounded quarterly. What amount should be invested today in order to have $2,000,000 in five years?

Important variables

PV - Present value: is the value today of a cash flow or a series of cash flows to be received or paid in the future.

FV - Future value: the value at some specified point in the future of a cash flow or a series of cash flows to be paid or received between the current date and the specified point in the future.

I - Annual Interest Rate: the annual interest rate

Y - Number of Compounding Periods per Year: the number of times per year that interest is calculated.

n Years: total number of years.

I/Y Interest Rate per Compounding Period

N = n x Y Number of Compounding Periods

Formula we used in class:

FV = PV x (1 + I / Y) ^N

Finance 3101 formulas - Selected (Brooks' Financial Management):

CHAPTER 3

1. FV_n = PV₀(1 + r)ⁿ
2. PV₀ = FV_n / (1 + r)ⁿ
3. n = ln (FV/PV) / ln (1 + r) [Rule of 72: n (yrs.) 72 / r (annual %)]
4. r = (FV_n/PV₀)^(1/n) 1 [Rule of 72: r (annual %) 72 / n (yrs.)]

CHAPTER 4

1. FVA_n = PMT [((1 + r)ⁿ - 1) / r]
2. PVA_t = PMT_(t+1) [(1 - 1/(1 + r)ⁿ) / r]
3. PVP_t = PMT_(t+1)/ r

Group of answer choices

$1,351,128

$2,971,900

$1,361,160

$1,345,940

Part B:

What is the standalone selling price of Cement using the expected-cost-plus-a-margin approach?

Group of answer choices

$800

$4,000

$2,000

$2,400

Part C:

What is the standalone selling price of Cement using the residual approach?

Group of answer choices

$800

$3,000

$2,000

$4,000