You are the finance manager for a particular company. The company plans to purchase $3,000,000 in new assembly line machinery in 5 years. (Use Table 11-1 and Table 11-2. Round your answers to the nearest cent.) (a) How much (in $) must be set aside now at 6% interest compounded semiannually to accumulate the $3,000,000 in 5 years? $ (b) If the inflation rate on this type of equipment is 5% per year, what will be the cost (in $) of the equipment in 5 years, adjusted for inflation? (c) Use the inflation-adjusted cost of the equipment to calculate how much (in $) must be set aside now. (d) Use the present value formula to calculate how much (in $) would be required now if you found a bank that offered 6% interest compounded daily to obtain the value found in part b. (Ignore leap years in calculation.) $
You are the finance manager for a particular company. The company plans to purchase $3,000,000 in new assembly line machinery in 5 years. (Use Table 11-1 and Table 11-2. Round your answers to the nearest cent.) (a) How much (in $) must be set aside now at 6% interest compounded semiannually to accumulate the $3,000,000 in 5 years? $ (b) If the inflation rate on this type of equipment is 5% per year, what will be the cost (in $) of the equipment in 5 years, adjusted for inflation? (c) Use the inflation-adjusted cost of the equipment to calculate how much (in $) must be set aside now. (d) Use the present value formula to calculate how much (in $) would be required now if you found a bank that offered 6% interest compounded daily to obtain the value found in part b. (Ignore leap years in calculation.) $
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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Transcribed Image Text:You are the finance manager for a particular company. The company plans to purchase $3,000,000 in new assembly line machinery in 5 years. (Use Table 11-1 and Table 11-2. Round your answers to the
nearest cent.)
(a) How much (in $) must be set aside now at 6% interest compounded semiannually to accumulate the $3,000,000 in 5 years?
$
(b) If the inflation rate on this type of equipment is 5% per year, what will be the cost (in $) of the equipment in 5 years, adjusted for inflation?
2$
(c) Use the inflation-adjusted cost of the equipment to calculate how much (in $) must be set aside now.
$
(d) Use the present value formula to calculate how much (in $) would be required now if you found a bank that offered 6% interest compounded daily to obtain the value found in part b. (Ignore leap years
in calculation.)
$
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