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 7% 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.
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 7% 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.
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
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Chapter2: Second-order Linear Odes
Section: Chapter Questions
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Question
CH.11
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 7% 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.)
$
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TABLE 11-2 Present Value Table (Present Value of $1 at Compound Interest)
%
1%
Periods
1%
2%
3%
4%
5%
6%
7%
8%
Periods
1
0.99502
0.99010
0.98522
0.98039
0.97087
0.96154
0.95238
0.94340
0.93458
0.92593
1
0.99007
0.98030
0.97066
0.96117
0.94260
0.92456
0.90703
0.89000
0.87344
0.85734
2
3
0.98515
0.97059
0.95632
0.94232
0.91514
0.88900
0.86384
0.83962
0.81630
0.79383
4
0.98025
0.96098
0.94218
0.92385
0.88849
0.85480
0.82270
0.79209
0.76290
0.73503
4
0.97537
0.95147
0.92826
0.90573
0.86261
0.82193
0.78353
0.74726
0.71299
0.68058
0.97052
0.94205
0.91454
0.88797
0.83748
0.79031
0.74622
0.70496
0.66634
0.63017
6.
7
0.96569
0.93272
0.90103
0.87056
0.81309
0.75992
0.71068
0.66506
0.62275
0.58349
7
8
0.96089
0.92348
0.88771
0.85349
0.78941
0.73069
0.67684
0.62741
0.58201
0.54027
8
0.95610
0.91434
0.87459
0.83676
0.76642
0.70259
0.64461
0.59190
0.54393
0.50025
9
10
0.95135
0.90529
0.86167
0.82035
0.74409
0.67556
0.61391
0.55839
0.50835
0.46319
10
0.84893
0.83639
0.72242
0.70138
11
0.94661
0.89632
0.80426
0.64958
0.58468
0.52679
0.47509
0.42888
11
12
0.94191
0.88745
0.78849
0.62460
0.55684
0.49697
0.44401
0.39711
12
13
0.93722
0.87866
0.82403
0.77303
0.68095
0.60057
0.53032
0.46884
0.41496
0.36770
13
14
0.93256
0.86996
0.81185
0.75788
0.66112
0.57748
0.50507
0.44230
0.38782
0.34046
14
15
0.92792
0.86135
0.79985
0.74301
0.64186
0.55526
0.48102
0.41727
0.36245
0.31524
15
16
0.92330
0.85282
0.78803
0.72845
0.62317
0.53391
0.45811
0.39365
0.33873
0.29189
16
17
0.91871
0.84438
0.77639
0.71416
0.60502
0.51337
0.43630
0.37136
0.31657
0.27027
17
18
0.91414
0.83602
0.76491
0.70016
0.58739
0.49363
0.41552
0.35034
0.29586
0.25025
18
19
0.90959
0.82774
0.75361
0.68643
0.57029
0.47464
0.39573
0.33051
0.27651
0.23171
19
20
0.90506
0.81954
0.74247
0.67297
0.55368
0.45639
0.37689
0.31180
0.25842
0.21455
20
21
0.90056
0.81143
0.73150
0.65978
0.53755
0.43883
0.35894
0.29416
0.24151
0.19866
21
22
0.89608
0.80340
0.72069
0.64684
0.52189
0.42196
0.34185
0.27751
0.22571
0.18394
22
23
0.89162
0.79544
0.71004
0.63416
0.50669
0.40573
0.32557
0.26180
0.21095
0.17032
23
24
0.88719
0.78757
0.69954
0.62172
0.49193
0.39012
0.31007
0.24698
0.19715
0.15770
24
25
0.88277
0.77977
0.68921
0.60953
0.47761
0.37512
0.29530
0.23300
0.18425
0.14602
25
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