In: Accounting
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?
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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 | ||||||||