Fraser Company will need a new warehouse in three years. The warehouse will cost

Question

Fraser Company will need a new warehouse in three years. The warehouse will cost $350,000 to build Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. Required What lump-sum amount should the company invest now to have the $350,000 available at the end of the three-year period? Assume that the company can invest money at: (Round your final answer to the nearest whole dollar amount.) Answer is complete but not entirely correct. sent Value 1. Ten percent 2. Six percent $ 293,860 @ $ 262,955 3

Explanation / Answer

Lump sum amount to be invested will be the present value of $350,000 for 3 years period the give interest rates

Requirement (1) – Ten Percent

= $350,000 x [PVIF 10%, 3 Years]

= $350,000 x 0.751314801

= $262,960

Requirement (2) – Six Percent

= $350,000 x [PVIF 6%, 3 Years]

= $350,000 x 0.839619283

= $ 293,867

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