Your company plans to purchase some new equipment with anestimated cost of $2.00 million two...

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?

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Expert Solution

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.

jeff jeffy answered 2 years ago

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