Question

A manufacturer of prototyping equipment wants to have $3,000,000 available 10 years from now so that a new product line can be initiated. If the company plans to deposit money each year, starting 1 year from now, the equation that represents how much the company is required to deposit each year at 10% per year interest to have the $3,000,000 immediately after the last

deposit is:___________
(a) 3,000,000(A∕F,10%,10)
(b) 3,000,000(A∕F,10%,11)
(c) 3,000,000 + 3,000,000(A∕F,10%,10)
(d) 3,000,000(A∕P,10%,10)

Answer 1

The correct option is (a) 3,000,000(A∕F,10%,10).

Step-by-step explanation:

Ordinarily, the equation to use to calculate the amount the company is required to deposit each year is given as follows:

A = F * (r / ((1 + r)^n - 1)) ....................... (1)

Where;

A = Annual deposit = ?

F = Future value or accumulated sum of amount = $3,000,000

r = Annual interest rate = 10%, or 0.01

n = Number of years.

The standard notation of equation (1) above is given as follows:

A = F(A / F, r, n) ................................ (2)

Substituting the relevant description from the above into equation (2), we have:

A = 3,000,000(A∕F,10%,10)

Therefore, the correct option is (a) 3,000,000(A∕F,10%,10).