Question

Starr Company decides to establish a fund that it will use 5 years from now to replace an aging production facility. The company will make a $97,000 initial contribution to the fund and plans to make quarterly contributions of $48,000 beginning in three months. The fund earns 8%, compounded quarterly. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table Factor" to 4 decimal places and final answer to the nearest whole dollar.)

What will be the value of the fund 5 years from now?

	Table Values are Based on: n = i = Present Value Table Factor Future Value Initial Investment Periodic Investments Future Value of Fund

Answer 1

Table values are based on:
n=	20
i=	2%
		Present Value	Table Factor	Future Value
Initial investment		$       97,000	1.4859	$          1,44,132
Periodic investment		$       48,000	24.2974	$       11,66,275
Future Value of fund				$       13,10,408
Working:
# 1	Future Value of investment of 1				=	(1+i)^n
					=	(1+0.02)^20
					=	1.4859
# 2	Future value of annuity of 1				=	(((1+i)^n)-1)/i
					=	(((1+0.02)^20)-1)/0.02
					=	24.2974