A contractor is saving money for a lucrative project. The initial cost is $175,000, annual outlays for maintenance is $1,500 and $4,000 every 3 years. There will be an additional one- time cost of $15,000 in 2 years for miscellaneous fixtures. At an interest rate of 8% per annum, how much money must he save now (in $) for the project?

A contractor is saving money for a lucrative project. The initial cost is $175,000, annual outlays for maintenance is $1,500 and $4,000 every 3 years. There will be an additional one- time cost of $15,000 in 2 years for miscellaneous fixtures. At an interest rate of 8% per annum, how much money must he save now (in $) for the project?

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A contractor is saving money for a lucrative
project. The initial cost is $175,000, annual
outlays for maintenance is $1,500 and $4,000
every 3 years. There will be an additional one-
time cost of $15,000 in 2 years for
miscellaneous fixtures. At an interest rate of
8% per annum, how much money must he
save now (in $) for the project?

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