Jeffrey wants to invest money in a 6% CD account that compounds semi-annual woul

Question

Jeffrey wants to invest money in a 6% CD account that compounds semi-annual would like the account to have a balance of $100,000 four years from now. Mow r must Jeffrey deposit to accomplish his goal? Evan has $368,882 accumulated in a 401K plan. The fund is earning a nut per year. The withdrawals will take place annually starting today. How soon ZACHARY Corp. is contemplating the purchase of a machine that will produce net after tax cash savings of $20,000 per year for five years. At the end of five years, the macn.ne can be sold to realize after-tax cash flows of $5,000. Interest is 12%. Assume the cash flows occur at the end of each year. Calculate the total present value of the cash savings. Rayfurd is considering two options for comparable computer software. Option A will cost $25,000 plus annual license renewals of $1,000 for three years, which includes technical support. Option B will cost $20,000 with technical support being an add-on charge. The estimated cost of technical support is $4,000 the first year, $3,000 the second year, and $2,000 the third year. Assume the software is purchased and paid for at the beginning of year one, but that technical support is paid for at the end of each year. Interest is at 8%. Ignore income taxes. Determine which option should be chosen based on present value considerations

Explanation / Answer

1)

Amount deposited to accomplish goal = Amount required at the end of 4 year /(1+r/2)^2n

Amount deposited to accomplish goal = 100000/(1+6%/2)^(2*4)

Amount deposited to accomplish goal = $78,940.92

2)

No of year will the fund be exhausted = nper(rate,pmt,pv,fv)

No of year will the fund be exhausted = nper(3%,30000,-368882,0)

No of year will the fund be exhausted = 15.57 years

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