Question

A company which uses austenitic nickel chromium ions to manufacture resistance heating wire is considering a new annealing drawing process to reduce cost. If the new process will cost $1.75 million dollars now, how much must be saved each year to cover the investment in ten years at an interest rate of 12%

Answer 1

Answer:

Annual deposit= $99,722.29

Explanation:

Giving the following information:

Future value (FV)= $1,750,000

Number of years (n)= 10

Interest rate (i)= 12%

To calculate the annual deposit, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (1,750,000*0.12) / [(1.12^10) - 1]

A= $99,722.29