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The number of months a new company could last if it raised $1,200,000 and had a burn rate (spending rate) of $37,000 per mont
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Answer #1

Amount Raised = PV = $1200000

Monthly Burn Rate = P = $37000

Let number of months be n

Monthly Interest rate = r = 0.03/12

The present value of the amount burned each month should be equal to the Amount raised

=> PV = P/(1+r) + P/(1+r)2 +....+ P/(1+r)n = P[1- (1+r)-n]/r

=> 1200000 = 37000[1- (1+0.03/12)-n]/(0.03/12)

=> (1+0.03/12)-n = 1 - 1200000*(0.03/12)/37000 = 0.91892

=> n = - ln (0.91892) / ln (1 + 0.03/12) = 33.86 months

Hence, the months the amount will last is 34 months

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