In: Finance
Your company plans to purchase some new equipment with an estimated cost of $2.00 million two years from now. Your company earns 5.1% compounded monthly on its savings. How much does the company need to save at the end of each month if it wants to pay cash for this purchase?
Information provided:
Present value= $2,000,000
Time= 2 years*12 = 24 months
Interest rate= 5.1%/12 = 0.4250% per month
The monthly saving is calculated by entering the below in a financial calculator:
PV= -2,000,000
N= 24
I/Y= 0.4250
Press the CPT key and PMT to compute the amount of monthly saving.
The value obtained is 87,832.38.
Therefore, the company needs to save $87,832.38 at the end of 2 years to purchase the new equipment.