Chugington, Inc. is doing some financial planning. The company currently has $39
ID: 2439763 • Letter: C
Question
Chugington, Inc. is doing some financial planning. The company currently has $39889 in its account, and it knows it will need to make a withdrawal of $35500 in 12 years to pay for an equipment upgrade. The company anticipates depositing $8463 at the end of year 6 from a project. The company will also need to make another large withdrawal of $5614 at the end of year 3 to pay off a loan. How much could Chugington spend on a remodel of the factory floor today and still meet all of its future financial obligations? Assume an interest rate of 2% compounded annually.
Enter your answer as follows: 1234
Round your answer. Do not include a dollar sign ("$"), any commas (",") or a decimal point (".").
Explanation / Answer
Present Value of Cash/ Future cash inflows Cash in hand 39889 Add: Present value of inflow at the end of 6yrs 7515.14 ($ 8463 * PVF at Yr-6 t 2% i.e. 0.8880) Total Present value of cash in hand 47404.14 Less: Present value of cash ooutflows Repayment of loan at yr-3 end -5290.07 ($ 5614 * PVF at Yr-3 at 2% i.e. 0.9423) Equipment upgrade -27991.8 ($ 35500* PVF at Yr-12 at 2% i.e. 0.7885) Cost of Remodel that can be spent today 14122.32 Amount that can be spent today is $ 14122