An organization is considering a new program. The program has a cost of $1,950,000 and will last for three years. What is the minimum future value this organization should expect to receive from…

The correct answer is A. $2,322,481. To justify the investment, the future value (FV) of the program's return must at least equal what the money would be worth if invested at the given rate of return. Use the Future Value formula: FV = PV × (1 + r)^n. FV = $1,950,000 × (1.06)^3 = $1,950,000 × 1.191016 =…

Program Benefits Management

Question

An organization is considering a new program. The program has a cost of $1,950,000 and will last for three years. What is the minimum future value this organization should expect to receive from this program if it is initiated and the rate of return is six percent?

Options

A$2,322,481
B$1,950,000
C$1,950,001
D$2,067,000

How the community answered

(25 responses)

A
80% (20)
B
4% (1)
C
12% (3)
D
4% (1)

Explanation

To justify the investment, the future value (FV) of the program's return must at least equal what the money would be worth if invested at the given rate of return. Use the Future Value formula: FV = PV × (1 + r)^n. FV = $1,950,000 × (1.06)^3 = $1,950,000 × 1.191016 = $2,322,481. This represents the minimum return the organization should expect; if the program cannot deliver at least this value, the investment cannot be justified at a 6% rate of return.

Topics

#Future Value#Time Value of Money#Financial Analysis#Program Benefits Realization

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