Question

XYZ Inc. plans to construct an additional building at the end of 10 years at an estimated cost of P5,000,000.00. To accumulate this amount it will make equal year end deposit in the fund earning 13%. However, at the end of 5th year it decided to have a larger building than originally intended to an estimated of cost P 8,000,000.00. What should be the annual deposit for the last 5 years? A. P271,447.80 B. P462,943.63 loco C. P734,391.41 o n D.P852, 345.70

Answer 1

To find the annual deposit that XYZ Inc. needs to make for the last five years at a 13% interest rate to accumulate P8,000,000.00, the future value of an annuity formula is used and solved for PMT.

Step-by-step explanation:

To determine the annual deposit XYZ Inc. must make for the last 5 years to accumulate P8,000,000.00 at a 13% interest rate, we can use the future value of an annuity formula. The formula is:

FV = PMT × { [(1 + r)n - 1] / r }

Where FV is the future value, PMT is the payment per period, r is the interest rate per period, and n is the number of periods.

From the question, FV is P8,000,000.00, r is 13% (or 0.13) compounded annually, and n is 5 years.

Thus, the formula we'll use to solve for PMT is:

PMT = FV / { [(1 + r)n - 1] / r }

Plugging the values we get:

PMT = P8,000,000.00 / { [(1 + 0.13)5 - 1] / 0.13 }

After calculating, we find the PMT, which is the annual deposit required for the next 5 years.