Question

A company that manufactures air-operated drain valve assemblies currently has $100,000 available to pay for plastic components over a 5-year period. If the company spent only $52,000 in year 1, what uniform annual amount can the company spend in each of the next 4 years to deplete the entire budget

Answer 1

$18,297.31

Step-by-step explanation:

The computation of the uniform amount that could be spend is shown below"

Here we determine the PMT

Given that

We assume the RATE = 10%

NPER = 5 - 1 = 4

PV = $100,000 × 1.1 - $52,000

= $110,000 - $52,000

= $58,000

FV = $0

The formula is given below:

= PMT(RATE,NPER,PV,FV,0)

The present value comes in negative

After applying the above formula, the uniform annual amount is $18,297.31