Assume DHL will need to replace a piece of equipment in 12 years that will cost

Question

Assume DHL will need to replace a piece of equipment in 12 years that will cost $240,000. The company will set up a sinking fund to finance this future purchase. What amount should DHL put away quarterly if it can earn 12% interest? Use Table 13.3.

$5,000.00

$2,304.00

$13,680.00

$120.00

ARE THE ONLY SELECTION WRONG ANSWER IS DELETED

? 31 % 4:28 PM O edia.mheducation. 13.2 Present value of an annuity of $I Period 2% 5% 10% 11% 12% 13% 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 09174 0.9091 0.9009 0.8929 0.8850 1.9416 19135 1.8961 18594 334 9080 .7833759 7355 .7125 1.6901 1668 2.8839 28286 2775 2.7232 2.6730 26243 2577 25313 24869 24437 2.4018 2.3612 3.80773.7171 3.6299 3.5459 3.465 3.3872 33121 3.2397 3.16993.1024 3.0373 29745 5 4.7134 45797 44518 43295 4.2124 4.1002 39927 38897 3.79083.6959 3.6048 35172 5.6014 54172 52421 5.0757 4.9173 4.7665 4.6229 44859 4.3553 4.2305 4.11143.9975 5.2064 50330 48684 4.7122 45638 4.4226 8 7.3255 70197 6.7327 6.4632 62098 5.9713 5.7466 5.5348 5.33495.1461 4.9676 4.7988 9 8.1622 77861 74353 7.1078 6.8017 65152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 8.9826 853028.11097.72177.3601 70236 67101 64177 6.1446 5.8892 5.6502 5.4262 9.7868 9.2526876058.30647869 74987 71390 6.8052 6.4951 6.2065 5.9377 5.6869 10.5753 9.9540 93851 8.8632 8.3838 7.9427 75361 7.1607 6.8137 6.4924 6.1944 5.9176 11.3483 10.63509.98569.3936 8.8527 8.3576 7.9038 7.4869 7.1034 67499 6.4235 6.1218 14 12.1062 11.296110.56319.8986 9.2950 8.7455 8.2442 7.7B62 7.3667 6.9819 6.6282 63025 12.8492 11.93791184 10.3796 9.7122 9.1079 8.5595 80607 76061 7.1909 6.8109 6.4624 3.5777 125611 1.6523 10.8378 10.1059 9.4466 88514 83126 78237 7.3792 6.9740 6.6039 14.2918 13.1661 121657 11.2741 104773 9.7632 9.1216 as436 8.0216 7.5488 7.1% 6.7291 18 14.9920 13.7535 12.6593 11.6896 108276 10.0591 9 3719 a7556 8.2014 7.7016 7.2497 68399 19 I5.6784 14323813.1339 12.0853 11.1581 10.3356 96036 8.9501 8.3649 7.8393 7.3658 6.9380 16.3514 148775 13.5903 12.4622 14699 0.5940 9818 9.1285 8.5136 7,9633 7.4694 7.0248 19.523417413 5.622 14.0939 12.7834 116536 10.6748 9.8226 9.0770 84217 7.8431 7.3300 22.3964 19.6004 17.2920 15.3724 3.7648 12.4090 112578 10.2737 9.4269 8.6938 80552 7.4957 7.3554 23.1148 19,7928 17.1591 15.0463 13.3317 11.9246 107574 9,7790 9511 8.2438 7.6344 31.4236 25.7298 21.4922 18.2559 5.7619 13.8007 122335 10.9617 9.9148 9.0417 8.30457.6752 6.4720 6.2303 6.002 5.7864 .5824 5.3893

Explanation / Answer

Given: Cost of the equipment to be replaced is $240,000

time of replacement= 12 years

interest = 12% per year, so for one quarter , interest is 3%

So the number of payments is 4*12= 48 quarters

Given that for $1 @ 12% interest for 12 years, the Present value of annuity = $6.1944

let x be the amount that is needed to be kept aside quaterly

Future value of annuity of 240000=x*(1.0348-1)/0.03

=> x=(240000*0.03)/(4.132-1)=7200/3.132

=> x=$2998.665

Thus the nearest amount to the calculated amount is $2304. So the answer is option 3.

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