A northern California consulting firm wants to start saving money for replacement of network servers. If the company invests $3,000 at the end of year 1 and increases the amount invested by 5% each year, how much will be in the account 10 years from now if it earns interest at a rate 8% per year? Part A) Using Excel, write an equation using the appropriate compound interest factor(s) that you could solve to answer the question above. Part B) Solve your equation from part A, then verify your result with a cash-flow table in Excel, like the one attached
A northern California consulting firm wants to start saving money for replacement of network servers. If the company invests $3,000 at the end of year 1 and increases the amount invested by 5% each year, how much will be in the account 10 years from now if it earns interest at a rate 8% per year?
Part A) Using Excel, write an equation using the appropriate compound interest factor(s) that you could solve to answer the question above.
Part B) Solve your equation from part A, then verify your result with a cash-flow table in Excel, like the one attached
Most people agree that receiving money now is preferable to obtaining it later because of the time value of money. It could be considered a precursor to the concept of time preference, which was developed later.
When evaluating the opportunity costs of spending rather than saving or investing money, the time value of money is taken into account. Depositors and lenders are compensated for the loss of their money's usage by interest, whether earned or paid on bank deposits. However, investors are only willing to put off spending their money now if there is a reasonable expectation that they will receive a positive net return on their investment in the future, such that any future increase in value is large enough to compensate for the investor's desire to spend their money now and inflation (if any).
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