Question

A rotary engine powers a vertical takeoff and landing (VTOL) personal aircraft known as the Moller Skycar M400. It is a flying car known as a personal air vehicle (PAV), and it is expected to make its first untethered flight in 2020. The PAV has been under development for 23 years at a total cost of $120 million. Assuming the $120 million was spent in an equal amount each year, determine the future worth at the end of the 23-year period at an interest rate of 9% per year. The future worth is $

Answer 1

$120 million was spent in an equal amount each year then amount spent each year be 120/23=$5.217 million

We need to find Future worth of this annual investment

FW of Investment done today after time "t" for given rate of return r is =Principle*(1+r)^t

Assuming that this annual investment is done at the beginning of each year therefore FW of Last payment is 5.217(1.09)

Therefore FW of this investment is some of Future worth of individual annual investments

=5.217(1.09)^23+5.217(1.09)^22+5.217(1.09)^21+5.217(1.09)^20+...+5.217(1.09)=5,.217(1.09)(1+...+(1.09)^22)

=5.217*((1.09)^23-1)/(1.09-1)

=362.748

Hence the Future Worth of this investment be $362.75 million