How much money could RTT Environmental Services borrow to finance a site reclamation project if it expects revenues of $280,000 per year over a 5-year cleanup period? Expenses associated with the project are expected to be $90,000 per year. Assume the interest rate is 10% per year.

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Asked Oct 10, 2019
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How much money could RTT Environmental Services borrow to finance a site reclamation project if it expects revenues of $280,000 per year over a 5-year cleanup period? Expenses associated with the project are expected to be $90,000 per year. Assume the interest rate is 10% per year.

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Step 1

Given: i=0.1 , n= 5, expenses (E)=$90000, Revenue (R) = 280000

Formula P=(R-E) 1+i)^n -1
i(1+)An
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Formula P=(R-E) 1+i)^n -1 i(1+)An

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Step 2

Money that RTT Environmental Services should borr...

= (280000- 90000) * 0.1(1+0.1)^5
= (280000- 90000) *3.79078677
= $720249.5
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= (280000- 90000) * 0.1(1+0.1)^5 = (280000- 90000) *3.79078677 = $720249.5

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