Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 1% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 7% per year, what is the equivalent annual worth in years 1 through 5 of the bonus package?
Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 1% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 7% per year, what is the equivalent annual worth in years 1 through 5 of the bonus package?
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Transcribed Image Text:Problem 02.045 - Equivalent annual worth of gradient
Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component.
Specifically, the company will set aside 1% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first
year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 7% per year,
what is the equivalent annual worth in years 1 through 5 of the bonus package?
The equivalent annual worth of the bonus package is $
Expert Solution
Step 1: Determine the problem
We need to find the equivalent annual worth of the bonuses paid to the employees where the bonus is equal to the 1% of the total revenue .
Sales increase by 10% .
Interest rate 7% .
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Solved in 3 steps with 2 images
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