You are the program manager for your organization. You have proposed a program that will cost $750,000 and will last for four years. Management is concerned with the cost of the program in relation…

$795,000 incorrectly applies only a single period of 6% growth ($750,000 x 1.06) rather than compounding the rate over all four years.

$750,001 is barely above the principal and completely ignores the 6% required rate of return compounded over four years.

The future value formula FV = PV x (1 + r)^n yields $750,000 x (1.06)^4 = $750,000 x 1.26248 = $946,857, which is the minimum value the program must return to satisfy a 6% annual rate of return over its four-year lifespan. Any return below this amount means the program fails to meet the required rate of return on the $750,000 investment.

$750,000 is the original investment amount representing a zero return, which does not satisfy any positive rate of return requirement.