Question

Johnson Manufacturing is considering investing $80,000 in a new piece of machinery that will generate net annual cash flows o
Determine the amount you must deposit today in your SUPER savings account, paying 12% interest, in order to accumlate $8,000
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Answer #1

Answer -

A) $30000

Explanation

While calculating the NPV for a project if the annual cash flows are same for each year then we consider the given amount of cash flow as yearly given i.e $30000 because the PV of annuity table is already at cummulative total of discounting factor.

B) $5694.24

A = P (1 + r/n) (nt)

A= future value

P = Intial deposit

r = interest rate annual

8000 = P(1+12/1)^1*3

P = 8000/1.404928

Amount will be = $5694.24

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