An A&E firm planning for a future expansion deposited $44,000 each year for 5 years into a sinking (investment) fund that was to pay an unknown rate of return. If the account had a total of $457,000 immediately after the fifth deposit, what rate of return did the company make on these deposits?

An A&E firm planning for a future expansion deposited $44,000 each year for 5 years into a sinking (investment) fund that was to pay an unknown rate of return. If the account had a total of $457,000 immediately after the fifth deposit, what rate of return did the company make on these deposits?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter14: Multinational Capital Budgeting

Section: Chapter Questions

Problem 1IEE

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Consumer Credit Counseling Services

Credit counseling teaches consumers about credit, budgeting, money management, and debt management. The counselor ensures that consumers can pay off their debts without declaring bankruptcy. Counselors also assist the negotiator, who negotiates with creditors on behalf of their clients to reduce interest rates on outstanding debt. Counselors can offer credit counseling to customers before or after they take on debt. Consumer Credit Counseling Services (CCCS) is a non-profit organization that offers credit counseling services. Some organizations can also be for profit. This type of organization comprises a group of professionals who are skilled negotiators.

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An A&E firm planning for a future expansion deposited $44,000 each year for 5 years into a sinking (investment) fund that was
to pay an unknown rate of return. If the account had a total of $457,000 immediately after the fifth deposit, what rate of return
did the company make on these deposits?

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The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year OperatingIncome Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The average rate of return for this investment is a.10% b.15% c.5% d.25%