Question

solve 3.16 only

4 percent return on his retirement investment, how much will retirement account at the end of 30 years? 3.15 Rockwell Machine is considering building a manufacturing plant that takes three years to complete. The plant is expected to generate a revenue of $500,000 per year at the end of each year of operation for 10 years (year 4 through 13). If Rockwell earns 8 percent on its investment, what is the maximum price that Rockwell is willing to pay for this investment opportunity? 3.16 An aviation company is planning to replace equipment in 10 years with an expected cost of $1,500,000. The company is planning to invest an equal amount of money at the end of each year only for the first five years with no further investment through year 10. If the company can earn 12 percent on its investment, how large must the size of uniform deposit be in the first five years to accumulate $1,500,000 at the end of the 10 years? 3.17 Precision Machine is signing a 10-year lease contract with a lease payment schedule of $40,000 at the end of each year for the first five years, $60,000 at the end of year 6, and increases of $20,000 at the end of each year through year 10. If Precision could earn 8 percent on its investment, how much does Precision need to deposit today to make all scheduled lease payments in the next 10 years? 3.18 Legacy Airport, which anticipates a significant increase in the number of passengers, is planning to construct a five-story

Answer 1

Let the amount deposited each year for the 1st five years be X

Since amount is deposited at the end of the year the interest for the 1st year will be Nil.

Also interest from the 2nd year onwards will be charged @ 12% for the remaining 9 years, 8 years , 7 years & so on

Year	Amount Deposited (A)	Interest @12% (B)	(A) * (B)
1	X	Nil
2	X	2.77 (1.12^9)	2.77X	Interest For 9 years
3	X	2.48 (1.12^8)	2.48X	Interest For 8 years
4	X	2.21 (1.12^7)	2.21X	Interest For 7 years
5	X	1.97 (1.12^6)	1.97X	Interest For 6 years
6	X	1.76 (1.12^5)	1.76X	Interest For 5 years
		Total	11.20X

Since amount deposited in 1st five years at 12% will accumulate 1500000 at the end of 10th year,

so this total of 11.20X will be equal to 1500000

Therefore 11.20X= 1500000

X= 1500000/11.20 = 133928.5

so the amount of 133928.5 sholuld be deposited at the end of 1st five years @ 12% to accumulate 1500000 at the end of 10th year.