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# How much is the company planning to raise toward the factory

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Optimism Inc. anticipates the need for the factory expansion four years from today. the firm has determined that it will have the necessary funds for expansion if it puts \$400,000 per year into a stock portfolio expected to earn 9% per yer. Deposits will be made at the endo of each year. How much is the company planning to raise toward factory expansion wit this plan? What amount would the copany expect to raise if it woud invest \$400,000 per yer for seven years? Why s the answer to part b more than twice as large as the anser to part a even though the length of the annuity is less than twice as long?

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#### Solution Preview

(a) Each Payment, PMT = \$400,000.00

Interest Rate, R % = 9

Compounding Frequency per year, N = 1

Time in Years, T = 4

Interest Rate per Period, &#953; = 0.09

Number of Periods, p = N * T = 4

FV (Ordinary) = PMT * [{(1 ...

#### Solution Summary

The expert determines how much a company is planning to raise towards the factory. A complete, neat and step-by-step solution is provided in the attached file.

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