Question

Adams Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 5 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 5 years, by conducting some research online, Adams has developed the following estimates.

Engine Overhaul Estimated Cash Outflow			Probability Assessment
$270			10%
590			30%
840			50%
980			10%

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How much should Adams Bowie deposit today in an account earning 8%, compounded annually, so that he will have enough money on hand in 5 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Deposit amount

$enter the deposit amount in dollars rounded to 0 decimal places

Answer 1

AnSWer: Probability AsSessment Skimated Cash outflo) obility 270 590 840 9%0 2.1 ורו 420 าร 722 Therefore Engine overhau estimated Gash outflo in 5Year -$122 colation o resent value of over Presentvalue - Future value l tInkest rate Interest rateCpouded annuall - 5 Years $122 1 +008 : $ 722 46933 491 Therefore he should deposit .ร 491 today in account. so that 'he Lili have eoh money n hand in 5 years to Pay for the overhoul