eBook A father is now planning a savings program to put his daughter through college. She is 13, plans to enroll at the university in 5 years, and she should graduate 4 years later. Currently, the annual cost (for everything - food, clothing, tuition, books, transportation, and so forth) is $19,000, but these costs are expected to increase by 5% annually. The college requires total payment at the start of the year. She now has $10,000 in a college savings account that pays 8% annually. Her father will make six equal annual deposits into her account; the first deposit today and sixth on the day she starts college. How large must each the six payments be? (Hint: Calculate the cost (inflated at 5%) for each year of college and find the total present value of those costs, discounted at 8%, as of the day she enters college. Then find the compounded value of her initial $10,000 on that same day. The difference between the PV of costs and the amount that would be in the savings account must be made up by the fathe deposits, so find the six equal payments that will compound to the required amount.) Do not round intermediate calculations. Round your answer to the nearest dollar,

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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A father is now planning a savings program to put his daughter through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $19,000, but these costs are expected to increase by 5% annually. The college requires total
payment at the start of the year. She now has $10,000 in a college savings account that pays 8% annually. Her father will make
six equal annual deposits into her account; the first deposit today and sixth on the day she starts college. How large must each
the six payments be? (Hint: Calculate the cost (inflated at 5%) for each year of college and find the total present value of those
costs, discounted at 8%, as of the day she enters college. Then find the compounded value of her initial $10,000 on that same
day. The difference between the PV of costs and the amount that would be in the savings account must be made up by the fathe
deposits, so find the six equal payments that will compound to the required amount.) Do not round intermediate calculations.
Round your answer to the nearest dollar.
Transcribed Image Text:eBook A father is now planning a savings program to put his daughter through college. She is 13, plans to enroll at the university in 5 years, and she should graduate 4 years later. Currently, the annual cost (for everything - food, clothing, tuition, books, transportation, and so forth) is $19,000, but these costs are expected to increase by 5% annually. The college requires total payment at the start of the year. She now has $10,000 in a college savings account that pays 8% annually. Her father will make six equal annual deposits into her account; the first deposit today and sixth on the day she starts college. How large must each the six payments be? (Hint: Calculate the cost (inflated at 5%) for each year of college and find the total present value of those costs, discounted at 8%, as of the day she enters college. Then find the compounded value of her initial $10,000 on that same day. The difference between the PV of costs and the amount that would be in the savings account must be made up by the fathe deposits, so find the six equal payments that will compound to the required amount.) Do not round intermediate calculations. Round your answer to the nearest dollar.
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