Winston Enterprises would like to buy some additional land and build a new factory.The anticipated total cost is £136 million.The owner of the ﬁrm is quite conservative and will only do this when the company has suﬃcient funds to pay cash for the entire expansion project.Management has decided to save £450,000 a month for this purpose.The ﬁrm earns 6% compounded monthly on the funds it saves.How long does the company have to wait before expanding its operations?

Question

Quizplus · Accepted Answer

The correct answer is A because the company has to wait 184.61 months before expanding its operations. This is because the company needs to save £136 million and it is saving £450,000 a month. The company earns 6% compounded monthly on the funds it saves, so the amount of money in the savings account will grow over time. After 184.61 months, the company will have enough money to pay cash for the entire expansion project.

Winston Enterprises Would Like to Buy Some Additional Land and Build