A multinational security software company is planning an overseas expansion that will cost $50 million of today’s dollars 3 years from now. Due to a robust economy in Europe, the cost is expected to increase by 15% per year in each of the next 3 years. Assuming the inflation rate is 4% per year, determine the required annual deposit into a fund that earns the market rate of 10% per year to ensure that the amount needed in 3 years will be available. Also, write the spreadsheet function that displays the annual deposit directly.
A multinational security software company is planning an overseas expansion that will cost $50 million of today’s dollars 3 years from now. Due to a robust economy in Europe, the cost is expected to increase by 15% per year in each of the next 3 years. Assuming the inflation rate is 4% per year, determine the required annual deposit into a fund that earns the market rate of 10% per year to ensure that the amount needed in 3 years will be available. Also, write the spreadsheet function that displays the annual deposit directly.
Chapter3: International Financial Markets
Section: Chapter Questions
Problem 3BIC
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Question
A multinational security software company is planning
an overseas expansion that will cost $50 million of today’s dollars 3 years from now. Due to a robust
economy in Europe, the cost is expected to increase by
15% per year in each of the next 3 years. Assuming the
inflation rate is 4% per year, determine the required
annual deposit into a fund that earns the market rate of
10% per year to ensure that the amount needed in
3 years will be available. Also, write the spreadsheet
function that displays the annual deposit
directly.
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