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Fraser Company will need a new warehouse in five years. The warehouse will cost $500,000 to build. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: What lump-sum amount should the company invest now to have the $500,000 available at the end of the five-year period? Assume that the company can invest money at: (

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Answer:

Results are below.

Explanation:

Giving the following information:

Future value (FV)= $500,000

Number of periods= 5 years

We were not provided with an interest rate, I will assume an interest rate of 7% compounded annually.

To calculate the initial investment, we need to use the following formula:

PV= FV / (1 + i)^n

PV= 500,000 / (1.07^5)

PV= $356,493.1