Question

Y Toys is planning a 30,000 square foot expansion to their manufacturing facility to prepare for the introduction of their Barney Babies line of stuffed animals. They will start construction now on the $700000 building and in 3 years hope to pay for it. What is the annual amount of toy sales revenue needed to pay for the building?

Answer 1

Answer:

The question is not complete,it is missing the rate if return on investment of

Y Toys is planning a 30,000 square foot expansion to their manufacturing facility to prepare for the introduction of their Barney Babies line of stuffed animals. They will  start construction on the $700,000 building in 3 years from now. What is the annual amount of toy sales revenue needed to pay for the building? Assume that Y Toys uses an interest rate of 19% per year. Show all steps in Excel.

The amount of sales required each year is $194,115.53 which is the same as the yearly savings to be made.

Explanation:

In arriving at the answer,I used PMT formula is excel.The PMT formula is given as PMT(rate,nper,,-fv) where r is the rate of return on yearly basis,nper is the period of investment and fv is future value of investment given as $700000 here, the amount payable on the facility in three years.

It is important to note that double commas are placed in the formula before pv and that the pv has a negative sign.

Kindly find attached spreadsheet for detailed computation on the PMT.

Download xlsx