TVM06 - Present Value of a Single Sum – Unknown Interest Rate
This is a problem in which the present value, future value and the number of periods is known, and the interest rate is unknown,
Your company needs $1,500,000 to build a new manufacturing plant six years from now. Your company currently has $800,000 to invest to build this plant. At what rate of interest must it invest the $800,000 to fund the plant six years from now?
First, plug in the known values into the appropriate cells:
The future value – FV – is $1,500,000
The present value – PV – is ($800,000)
The number of periods – NPER is 6
Going to the formulas tab, look for the Rate function.
The function wizard pops up
The rate is 11%