A company is planning to expand its business in a few years. New plant construction costs are estimated to be $4.75 per square foot. The company invests $850,000 today at 6% compounded quarterly.

Question

a. How many square feet could be built in 3 1/2 years?

b. If the company waits for a total of five years, the construction costs increase to $5.10 per square foot. How many square feet could they build if they waited a total of five years?

Answer 1

850000(1+.06/4)^(4*3.5)/4.75 = 220,419

850000(1+.06/4)^(4*5)/5.10 = 224,476