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View History Bookmarks People Window Help vcu tps://edugen wileyplus.com/edugen/itil/main.un WileyPLUS Mohammec Would you lke to translate it? NopeTranslate Never translate Arabic Options x Intermediate Accounting, 16e Brief Exercise 6-14 Cindy Monroe wants to create a fund today that wil enable her to withdraw $27,700 per year for 6 years, with the first withdrawal to take place 4 years from today If the fund earns 9% interest, how muct, must andy invest today? (Round factor values to S decimal places, e.g. 1.25124 and final answers to decimal places, e.g. 458,583 Investment amount Question Attempts: 1 of 3 used SAVE FOR LATER SUBKIT ANSWERExplanation / Answer
For knowing amount to be invested in the fund so that $27700 per year can be withdrawn for 6 year starting from 4 years from now. Let’s calculate present value of total withdrawals;
Year
Withdrawals
Discounting factor @ 9%
Present value
4
$27700
(1 + 0.09)4
$19,623.38
5
$27700
(1 + 0.09)5
$18,003.10
6
$27700
(1 + 0.09)6
$16,516.60
7
$27700
(1 + 0.09)7
$15,152.85
8
$27700
(1 + 0.09)8
$13,901.70
9
$27700
(1 + 0.09)9
$12,753.85
Total present value of all withdrawals
$95951.48
Thus it is clear that fund to be created with $95951.48 (Approx.) or $95951
Year
Withdrawals
Discounting factor @ 9%
Present value
4
$27700
(1 + 0.09)4
$19,623.38
5
$27700
(1 + 0.09)5
$18,003.10
6
$27700
(1 + 0.09)6
$16,516.60
7
$27700
(1 + 0.09)7
$15,152.85
8
$27700
(1 + 0.09)8
$13,901.70
9
$27700
(1 + 0.09)9
$12,753.85
Total present value of all withdrawals
$95951.48
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