Question

1. A company desires to accumulate $150,000 in four years to expand its manufacturing facility. If...

1. A company desires to accumulate $150,000 in four years to expand its manufacturing facility. If the company can earn 9%, what equal amounts must it deposit annually?

a. $32,805 /year

b. $33,879/year

c. $35,879/year

d. $37,999/year

2. What is the present worth of $4,500 at the end of each year for 12 years at 9.5% compounded annually?

a. $21,425.99

b. $31,427.28

c. $35,968.09

d. $37,798.99

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Homework Answers

Answer #1

Question 1

Amount to be accumulated (F) = $150,000

Interest rate (i) = 9%

Time period (n) = 4 years

Calculate the annual amount to be deposited -

A = F(A/F, i, n)

A = $150,000(A/F, 9%, 4)

A = $150,000 * 0.21867 = $32,805

The equal amount that company must deposit annually is $32,805.

Hence, the correct answer is the option (a).

Question 2

Annual amount (A) = $4,500

Time period (n) = 12 years

Rate of interest (i) = 9.5%

Calculate the Present Worth -

PW = A(P/A, i, n)

PW = $4,500(P/A, 9.5%, 12)

PW = $4,500 * 6.98383939

PW = $31,427.28

The correct answer is the option (b).

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