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Fraser Company will need a new warehouse in eight years. The warehouse will cost $500,000 to build. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: 1. What lump-sum amount should the company invest now to have the $500,000 available at the end of the eight-year period? Assume that the company can invest money at eight percent.

Fraser Company will need a new warehouse in eight years. The warehouse will cost $500,000 to build. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: 1. What lump-sum amount should the company invest now to have the $500,000 available at the end of the eight-year period? Assume that the company can invest money at eight percent.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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### Fraser Company's Future Investment Planning Fraser Company will need a new warehouse in eight years. The warehouse will cost $500,000 to build. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. #### Required: 1. **What lump-sum amount should the company invest now to have the $500,000 available at the end of the eight-year period? Assume that the company can invest money at eight percent.** ![Investment Calculator](data:image/png;base64,amount-to-be-invested-placeholder) 2. **What lump-sum amount should the company invest now to have the $500,000 available at the end of the eight-year period? Assume that the company can invest money at thirteen percent.** ![Investment Calculator](data:image/png;base64,amount-to-be-invested-placeholder) To solve these questions, the present value formula can be used: \[ PV = \frac{FV}{(1 + r)^n} \] where: - \( PV \) is the present value (lump-sum to invest now), - \( FV \) is the future value ($500,000), - \( r \) is the annual interest rate (8% or 13%), - \( n \) is the number of years (8 years). For detailed instructions on using Excel for these calculations, please refer to our [Excel Financial Functions Guide](#).
Transcribed Image Text:### Fraser Company's Future Investment Planning Fraser Company will need a new warehouse in eight years. The warehouse will cost $500,000 to build. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. #### Required: 1. **What lump-sum amount should the company invest now to have the $500,000 available at the end of the eight-year period? Assume that the company can invest money at eight percent.** ![Investment Calculator](data:image/png;base64,amount-to-be-invested-placeholder) 2. **What lump-sum amount should the company invest now to have the $500,000 available at the end of the eight-year period? Assume that the company can invest money at thirteen percent.** ![Investment Calculator](data:image/png;base64,amount-to-be-invested-placeholder) To solve these questions, the present value formula can be used: \[ PV = \frac{FV}{(1 + r)^n} \] where: - \( PV \) is the present value (lump-sum to invest now), - \( FV \) is the future value ($500,000), - \( r \) is the annual interest rate (8% or 13%), - \( n \) is the number of years (8 years). For detailed instructions on using Excel for these calculations, please refer to our [Excel Financial Functions Guide](#).
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