Actuarial Mathematics
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Time Value of Money

Worked Example

A project management team have projected that income from a capital project will start to flow in 10 years after completion of the build. From then on they project income of 500,000 p.a. (assumed to come in continuously over the year) growing at a rate of 2.5% p.a. If the project is planned to have a life of 25 years from completion and they wish to make a 20% profit from the build what is the maximum the accumulated spend can be at the end of the 10 year build? Assume that all monies receive a return of 6.5% p.a.

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