You are the finance manager for a particular company. The company plans to purchase $2,000,000 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 $2,000,000 in 5 years? $ 1488187.83 (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? $ 2805103.46 (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.) $ 2078122.99
You are the finance manager for a particular company. The company plans to purchase $2,000,000 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 $2,000,000 in 5 years? $ 1488187.83 (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? $ 2805103.46 (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.) $ 2078122.99
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:You are the finance manager for a particular company. The company plans to purchase $2,000,000 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 $2,000,000 in 5 years?
$ 1488187.83
(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?
$ 2805103.46
(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.)
$ 2078122.99
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