Omega Instruments has budgeted $300,000 per year to pay for certain ceramic parts over the next 5 years. The company expects the cost of the parts to increase uniformly according to an arithmetic gradient of $10,000 per year. a) Write any equation using the appropriate compound interest factor(s) for the present worth of the cost of the ceramic parts over the next 5 years if Omega’s interest rate is 6%. b) Solve your equation from Part A. Use the Excel calculator to determine the compound interest factor(s). c) In Excel, verify your result from Part B with a cash-flow table like the one shown below.
Omega Instruments has budgeted $300,000 per year to pay for certain ceramic parts over the next 5 years. The company expects the cost of the parts to increase uniformly according to an arithmetic gradient of $10,000 per year. a) Write any equation using the appropriate compound interest factor(s) for the present worth of the cost of the ceramic parts over the next 5 years if Omega’s interest rate is 6%. b) Solve your equation from Part A. Use the Excel calculator to determine the compound interest factor(s). c) In Excel, verify your result from Part B with a cash-flow table like the one shown below.
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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Omega Instruments has budgeted $300,000 per year to pay for certain ceramic parts over the next 5 years. The company expects the cost of the parts to increase uniformly according to an arithmetic gradient of $10,000 per year.
- a) Write any equation using the appropriate
compound interest factor(s) for the present worth of the cost of the ceramic parts over the next 5 years if Omega’s interest rate is 6%. - b) Solve your equation from Part A. Use the Excel calculator to determine the compound interest factor(s).
- c) In Excel, verify your result from Part B with a cash-flow table like the one shown below.
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· EOY Cash Flow Equivalent at EOY 0 at 5%
$0.00
$1,190.48
$1,133.79
$1,079.80
$1,028.38
$0
$1,250
$1,250
$1,250
1
3
2
4.
3
$1,250
$1,250
$1,250
$1,250
4
5
$979.41
$932.77
7
$888.35
Total
$7,232.97
10
11
12
18
14
15
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