Question

Discounted Tires plans to save $12144, $24714, and $29687 at the end of each year for Years 1 to 3, respectively. If it earns 7 percent on its savings, how much will the firm have saved at the end of Year 3?

Answer 1

The firm will have saved $81,445.68 at the end of Year 3.

Step-by-step explanation:

To calculate the total savings at the end of Year 3, we can use the formula for compound interest. The formula is:

Future Value = Payment imes (1 + Interest Rate)^Number of Years

In this case, the payment for Year 1 is $12,144, for Year 2 is $24,714, and for Year 3 is $29,687. The interest rate is 7% or 0.07. Plugging these values into the formula, we get:

Future Value = $12,144 imes (1 + 0.07)^1 + $24,714 imes (1 + 0.07)^2 + $29,687 imes (1 + 0.07)^3

Simplifying the equation, we find that the firm will have saved $81,445.68 at the end of Year 3.