A person deposits $1,000 into a money market account which pays interest at a ra

Question

A person deposits $1,000 into a money market account which pays interest at a rate of 10% per year. What is the amount in the account after 20 years? A NSU optical engineering student believes that by modifying the golf cart to solar powered cart, NSU would earn (or save) an extra $5,000 per year. At an interest rate of 10% per year, how much could NSU afford to spend now just to break even over 5 year project period? The fixed costs at Mathew Motors are $2 million annually. The main product has revenue of $10.00 unit and $5.00 variable cost. Determine the following, (a) Breakeven quantity per year, (b) Calculate ual profit if 200,000 units are sold and if 400,000 units are sold.

Explanation / Answer

(4)

Amount after 20 years ($) = 1000 x FVIF(10%, 20) = 1000 x 6.7275 = 6,727.50

(5)

Required spending ($) = 5,000 x PVIFA(10%, 5) = 5,000 x 3.7908 = 18,954

Note: First 2 questions are answered.

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