You need to prepare for three large, upcoming project expenditures which will begin 3 years from now. The first required cash flow will be $56,000, the next year will require $94,000, and then $132,000. If you begin setting aside funds from your current budget next month, how much do you need to save each month in order to have enough to cover all three cash flows the day the first cash flow comes due? Assume you can invest these funds at 8.4 percent APR, compounded monthly.

You need to prepare for three large, upcoming project expenditures which will begin 3 years from now. The first required cash flow will be $56,000, the next year will require $94,000, and then $132,000. If you begin setting aside funds from your current budget next month, how much do you need to save each month in order to have enough to cover all three cash flows the day the first cash flow comes due? Assume you can invest these funds at 8.4 percent APR, compounded monthly.

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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You are responsible to manage an IS project with a 4-year horizon. The annal cost of the project is estimated at $40,000 per year, and a one-time costs of $120,000. The annual monetary benefit of the project is estimated at $96,000 per year with a discount rate of 6 percent. a. Calculate the overall return on investment (ROI) of the project. b. Perform a break-even analysis (BEA). At what year does break-even occur?
You decide to make monthly payments into a retirement fund earning 4.75% compounded monthly. Note: Payments are made at the end of each period.
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(4) Evaluate the ROI.
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