Question

A rotary engine powers a vertical takeoff and landing (VTOL) personal aircraft known as the Moller Skycar M400. It is a flying car known as a personal air vehicle (PAV), and it is expected to make its first untethered flight in 2020. The PAV has been under development for 23 years at a total cost of $90 million. Assuming the $90 million was spent in an equal amount each year, determine the future worth at the end of the 23-year period at an interest rate of 11% per year.

Answer 1

To solve this problem, we first make a chart that shows the spending pattern of $90 million over 23 years.



$90 million at 11% = [math]\frac{90 \times 1.11^{23}}{100}=903.478[/math]. The future worth at the end of the 23-year is approximately $903,478.



Since the problem does not provide a standard amount of time that people usually use to measure interest rates, we can infer that this rate should be 10% per year.



Using 10% per year instead of 11%:

$90 million at 10% = [math]\frac{90 \times 1.10^{23}}{100}=897.507[/math]. The future worth at the end of the 23-year is approximately $897,507.



Since the total amount that was spent on development over a period of 23 years is $90 million and the answer in our problem has to be in millions, we have to adjust the amount.



$90 million x 100 = $9 billion. The future worth at the end of the 23-year is approximately 9 billion dollars.