Henry Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some research online, Henry has developed the following estimates. Engine Overhaul Estimated Cash Outflow $320 590 760 860 Probability Assessment 10% 30% 50% 10%

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
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Henry Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the
engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some
research online, Henry has developed the following estimates.
Engine Overhaul
Estimated Cash Outflow
$320
590
760
860
Click here to view factor tables.
Probability
Assessment
Deposit amount
$
10%
30%
50%
How much should Henry Bowie deposit today in an account earning 9%, compounded annually, so that he will have enough money on
hand in 2 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g.
458,581.)
10%
Transcribed Image Text:Henry Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some research online, Henry has developed the following estimates. Engine Overhaul Estimated Cash Outflow $320 590 760 860 Click here to view factor tables. Probability Assessment Deposit amount $ 10% 30% 50% How much should Henry Bowie deposit today in an account earning 9%, compounded annually, so that he will have enough money on hand in 2 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) 10%
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