GARY HUDSON was born and raised in Pensacola, Florida. He obtained his bachelor\

Question

GARY HUDSON was born and raised in Pensacola, Florida. He obtained his bachelor's degree in business from Florida State University, where he enrolled in the NROTC program, and, after graduation, he received a commission in the U.S. Marine Corps. After his release from active duty, Gary used his GI Bill benefits to obtain a master's degree in health services administration from the University of Florida. His first job in healthcare was as a special projects coordinator/financial analyst at a large Miami hospital. He enjoyed his work there, but his ultimate goal was to return to Pensacola as the manager of a smaller healthcare business, where he would have more responsibility and authority. After five years in Miami, Gary became the chief operating officer of Panhandle Surgery Centers, an investor-owned chain of ambulatory surgery centers with six locations in the panhandle area of Florida.
Immediately after assuming his new position, Gary has to face several decisions. First, the company currently has $100,000 in its cash account, but its target cash balance is only $50,000. Thus, Gar}' wants to temporarily invest the excess $50,000 in marketable securities, which typically consist of low-risk, short-term securities such as Treasury bills or money market mutual funds. One alternative that Gary is consider

Explanation / Answer

5.Assume now that the payments are made at the beginning of the each period. Repeat the analysis in Q.4


4 Now consider a second alternative for accumulating funds to buy the new billing system.In lieu of lump sum investment, assume that five annual payments of $32,000 are made at the of each year
a.What type of annuity is this?
Answer: since it occurs beginning of the year it is annuity Due.

b.What is the present value of this annuity if the payments are invested in n account that pays 10 percent interest annually? 10 percent compounded annually?
Answer: 32000= x PVIFA(10%,5)x1.1= $7674.108

c. What is the future value of this annuity if the payments are invested in an account that pays 10 percebt interest annually? 10 percent compounded semi annually?
FV= 7674.108 FVIFA(10%,5)x 1.1= $51536.316
coumpounded semi annually = 7674.108 FVIFA(5%, 10)x 1.05= $101350.311

6a. present value=32000*3.79=121280

b.future value at the end of 5 year =32000/3.17+32000=42094.6

present value=42094.6*3.79=159538.53

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