Question

oselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 2% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 6% per year, what is the equivalent annual worth in years 1 through 5 of the bonus package?

Answer 1

Answer:

To set the parameters for the bonus page for the 5 years are as follows:

The sales revenue for the year 1 = $5,000,000.00

Bonus percentage = 2% (0.02) of the sales per year

Then the interest rate for the Bonus earnings = 6% (0.06)

also remember that the sales revenue from year 3 will be compounded by 10% for the remaining 3 successive years.

Explanation:

For Year 1: $5000000.00 x 0.02 =$100,000.00

Solving for the Bonus interest = 100,000.00 x 0.06 = $6,000.00

Therefore, Total Bonus earnings for the Year 1 = $6,000.00

For Year 2: $5,500,000.00 x 0.02 = $110,000.00;

Solving for the Bonus interest = 110,000.00 x 0.06 = $6,000.00

Therefore, Total Bonus earnings for the Year 2 = $6,600.00

For Year 3: The sales revenue of $5500000.00 compounded by 10%

= $5500000.00 x 0.10 = $550,000.00.

Therefore, the sales revenue of year 2 + the compounded interest amount

= $5500000.00 + $550,000.00 = $6,050,000.00

$6,050,000.00 x 0.02 = $121,000.00;

Solving for the Bonus interest = $121,000.00 x 0.06 = $7,260.00

Therefore, Total Bonus earnings for the Year 3 = $7,260.00.

For Year 4: The sales revenue of $6,050,000.00 compounded by 10%

= $6,050,000.00 x 0.10 = $605,000.00.

Therefore, the sales revenue of year 3 + the compounded interest amount

= $6,050,000.00.00 + $605,000.00 = $6,655,000.00

$6,655,000.00 x 0.02 = $133,100.00;

Solving for the Bonus interest = 133,100.00 x 0.06 = $7,986.00

Therefore, Total Bonus earnings for the Year 4 = $7986.00

For Year 5: The sales revenue of $6,655,000.00 compounded by 10%

= $6,655,000.00 x 0.10 = $665,500.00.

Therefore, the sales revenue of year 3 + the compounded interest amount

= $6,655,000.00.00.00 + $665,500.00 = $7,320,500.00

$7,320,500.00 x 0.02 = $146,410.00;

Solving for the Bonus interest = $14,6410 x 0.06 = $8784.60

Therefore, Total Bonus earnings for the Year 5 = $8784.60

Finally, the total equivalent annual worth in years 1 -5 through 5 0f the bonus package =  

Year 1 = $6,000.00

Year 2 = + $6,600.00

Year 3 = + $7,260.00

Year 4 = + $7986.00

Year 5 = + $8784.60

$6,000.00 + $6,600.00 +  $7,260.00 + $7986.00 + $8784.60

= $36,630.60

Answer 2

Answer:

Answer for the question:

oselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 2% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 6% per year, what is the equivalent annual worth in years 1 through 5 of the bonus package?

is given in the attachment.

Explanation: