A company estimates that it will need $375,000 in 11 years to replace an importantmachine. If it establishes a sinking fund, by making fixed monthly payments into anaccount paying 8.4% compounded monthly,a) how much should each payment be?Ab) How much of the $375,000 that is in the account in the end will be interest?

We need to use future value of annuity formula to calculate payment size PMT =FVn(1+i)n -1i Where…

Answered: A company estimates that it will need…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You need to accumulate $10,000. To do so, you plan to make deposits of $1,400 per year with the first payment being made year from today - into a bank account that pays 9% annual interest. Your last deposit will be less than $1,400 if less is needed to round out to $10,000. How many years will it take you to reach your $10,000 goal? Do not round intermediate calculations. Round your answer up to the nearest whole number. year(s) How large will the last deposit be? Do not round intermediate calculations. Round your answer to the nearest cent. $
Kramer's investment project costs $14300 and has abbual cash flows of $3800 for six years. A. What us the discounted payback period if the discount rate is zero percent? B. What is the discounted payback period if the discount rate is 4 % ?
Kramer's investment project costs $14300 and has abbual cash flows of $3800 for six years. A. What us the discounted payback period if the discount rate is zero percent? B. What is the discounted payback period if the discount rate is 4 % ?
An investment project costs $15,300 and has annual cash flows of $3,700 for six years. a. What is the discounted payback period if the discount rate is zero percent? Discounted payback period b. What is the discounted payback period if the discount rate is 4 percent? Discounted payback period c. What is the discounted payback period if the discount rate is 20 percent? Discounted payback period
Vinay
An investment makes annual payments. The first payment of $245 is due in one year at i = 1. The payments grow at a rate of 14.0% annually until t =14. Payments are then stable until t =32. Afterwards, payments grow at a rate of 2.0% annually (the payment at i =33 is 2.0% bigger that the payment at 1 =32) and are paid into perpetuity. a) What is the size of the cash flow at / =15? 2$ |(Give answer to 2 decimal places.) b) What is the size of the cash flow at t =33? |(Give answer to 2 decimal places.) c) What is the present value of the investment if the discount rate is 16.0%? | (Give answer to 2 decimal places.)
At present, a foundation who has 6 million deposit in bank with interest of 10% compounded annually, is planning to build a project that will last for a long period of time. The project will require an initial cost of P8.5 million four years from now, annual maintenance would be P200,000 for the first 5 years and will increase by P10,000 every year for the next 10 years and then the maintenance will be P300,000 per year for the rest of its life. Major repair is estimated to be P1.5 million every 8 years to start 10 years after construction. Determine the amount to be deposited at the end of each year for five years, starting three years from now, to sustain the cost of the project. .
A business is planning to purchase a piece of equipment that will produce a continuous stream of income for 8 years with rate of flow f(t) = 9,000. If the continuous income stream earns 6.9%, compounded continuously, what single deposit into an account earning the same interest rate will produce the same future value as the continuous income stream? (This deposit is called the present value of the continuous income stream.) What is the future value of the investment? (Round to the nearest dollar as needed.)
An investor pays $275,000 for a mine that will produce level annual revenue for 18 years. What should the level annual revenue be (received at the end of each year) if the investor is to receive 4% annual return on the investment while recovering the principal in a sinking fund earning 2.5% per year?
A company wants to deposit extra money to cover its increased maintenance costs for the next 13 years. How much should they deposit now if they expect costs to increase by $4,563 per year, starting from year 2, and their MARR is 9%?
it is desired to save $20,000 by depositing $800 every 3 months in an investment that pays 8% coumpounded quarterly. What would be the approximate value of N in years?
How many years will it take Rexchem, Inc., to accumulate $725,000 for a chemical feeder, if the company deposits $50, 000 each year, starting one year from now, into an account that earns interest at 10% per year? (Round up your answer to an integer value.) Rexchem, Inc., will take years.

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