Question

CII, Inc., invests $630,000 in a project expected to earn a 12% annual rate of return. The earnings will be reinvested in the project each

Answer 1

Answer:

$1,956,684

Explanation:

As the project has a expected annual return, we have to calculate future value of this investment to find how much money Cll, Inc. will have after 10 years to reinvest.

We know,

FV = PV × $(1 + i)^{n}$

Given,

Present Value, PV = $630,000

Annual rate of return, i = 12% = 0.12

Number of period, n = 10 years

Putting the value into the above formula, we can get,

FV = $630,000 × $(1 + 0.12)^{10}$

FV = $630,000 × 3.105848

FV = $1,956,684

$1,956,684 can be reinvested after the liquidation of 10 years.