1. The Food Store is planning a major expansion for four years from today. In pr
ID: 2639780 • Letter: 1
Question
1. The Food Store is planning a major expansion for four years from today. In preparation for this, the company is setting aside $35,000 each quarter, starting today, for the next four years. How much money will the firm have when it is ready to expand if it can earn an average of 6.25 percent on its savings?
2. What is the future value of $1,070 a year for 4 years at a 6 percent rate of interest?
1. The Food Store is planning a major expansion for four years from today. In preparation for this, the company is setting aside $35,000 each quarter, starting today, for the next four years. How much money will the firm have when it is ready to expand if it can earn an average of 6.25 percent on its savings?
2. What is the future value of $1,070 a year for 4 years at a 6 percent rate of interest?
Explanation / Answer
1) We need to find the FV of our savings. This is an annuity due.
FV of cash flows = [PMT * {(1 + I/Y)N
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