Problem #5 (3 points) The Universal Joint Company has determined that a new conv

Question

Problem #5 (3 points) The Universal Joint Company has determined that a new conveyor line will save the company $12,000 per month. If the savings are invested monthly at six percent (6%) per year, compounded monthly, how long will it take to accumulated $280,000? Problem #6 (3 points) The Lake Meade Manufacturing Company plans to purchase a straddle carrier at a cost of $280,000 and will finance it over forty-eight (48) months at 6% per year compounded monthly What is the monthly payment for this financial arrangement? Problem #7 (3 points) Your maintenance costs are anticipated to be $20,000 at the end of year one, and will increase by $1250 each year for the following six years. What present sum of money should be invested now to pay for the required maintenance expenses over the seven-year period. Solve for the present equivalent using a gradient formula assuming an interest rate of eight percent (8%) compounded annually.

Explanation / Answer

5.

Savings per month P = 12000

Future value = 280000

Monthly interest rate = 6%/12 = .5%

Then,

280000 = 12000*(1.005^n-1)/.005

(280000/12000)*.005 = 1.005^n – 1

.1167 = 1.005^n – 1

1.1167 = 1.005^n

n = log1.1167/log1.005

n = 22.13 months or 1.85 years

Hence, in 22.13 months, $280000 will be accumulated.

6.

Loan amount = 280000

Time = 48 months

Monthly interest rate = 6%/12 = .5%

Let, monthly payment = EMI

Then,

280000 = EMI*(1-1/1.005^48)/.005

EMI = 280000/42.580

EMI = $6575.86

Hence, monthly payment will be $6575.86.

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