Bad Company, Inc., has a major outlay of $1.65 million that is needed to renovat

ID: 2822551 • Letter: B

Question

Bad Company, Inc., has a major outlay of $1.65 million that is needed to renovate the company's manufacturing facility. Because the company's management is conservative, it won't undertake the renovation until it has the cash necessary to fund the renovation. The company plans to deposit $131,000 each quarter into an account that will earn 1.25 percent per quarter. How many years will it be until the company has the money saved for the renovation?

3.11 years

3.15 years

3.13 years

2.89 years

2.68 years

Explanation / Answer

Correct option is > 2.89 years

We will get close answer by using the following method:

Using financial calculator BA II Plus - Input details:

FV = Future Value =

$1,650,000.00

PV = Present Value =

$0.00

I/Y = Rate =

1.25

PMT =

-$131,000.00

CPT > N = Total number of period in Quarters =

11.77

Convert period in years = N/4 =

2.94

Hence, correct option is 2.89 years as 2.94 is closer to the given option.