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Dahasolnce [82]
2 years ago
14

You are looking to purchase a new car, and you expect to have annual maintenance costs to keep it running. According to your cal

culations, you expect to incur $150 maintenance costs in the first year and expect the costs to increase by $100 for the next 7 years. You plan to keep the car for 8 years in total. How much money should you have in your savings account today, so that you do not have to worry about maintenance? The savings account pays 2% per year, compounded annually.
Business
1 answer:
Alenkinab [10]2 years ago
7 0

Answer:

I should have $11,554.94 in my savings account today.

Explanation:

This can be calculated using the formula for calculating the present value (PV) of a growing annuity as follows:

PVga = (P / (r - g)) * (1 – ((1 + g) / (1 + r))^n) .................... (1)

Where;

P = maintenance costs in the first year = $150

r = interest per year = 2%, or 0.02

g = growth rate of maintenance costs = Expected annual increase in maintenance costs / maintenance costs in the first year = $100 / $150 = 0.666666666666667

n = useful life = 8

Substituting the values into equation (1), we have:

PVga = (150 / (0.02 - 0.666666666666667)) * (1 - ((1 + 0.666666666666667) / (1 + 0.02))^8)

PVga = 11,554.94

Therefore, I should have $11,554.94 in my savings account today.

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2 years ago
The following refers to units processed by a breakfast cereal maker in August. Compute the total equivalent units of production
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Answer:

Total Equivalent Units Conversion    746,000

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Breakfast Cereal Maker

Weighted-Average Inventory Method

Total Equivalent Units

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Units completed         620,000               100 %             620,000

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<u>Total Equivalent Units                                                      746,000</u>

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<em>The total Equivalent units are obtained by adding the percent of the units in the ending work in process inventory to the units completed and transferred out. This is the average weighted method of finding the equivalent units.</em>

<em>As only conversion is required we found out the conversion units only.</em>

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