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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 28 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 28-year period at an interest rate of 8% per year.

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Answer:

$409.18million

Explanation:

Since the amount of $120 million is to be spend in equal installments over a period of 28 years, therefore it will be appropriate to calculate the Future worth using future value of annuity formula:

  • Future value of annuity = (R((1+i)^n-1)/i)
  • Here R= Installment per year=$120/28=$4.29million
  • i=interest rate=8%
  • n= number of year=28
  • Future worth at the end of 28 years=4.29(((1+8%)^28-1)/8%)
  •                                                            =4.29(7.63/8%)
  •                                                            =4.29*95.38
  •                                                            =$409.18million

                                   

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