Question

This is for engineering economics class. We use the excel software. Below is exercise 5, and I really need help with it. Below that is my work on excel. I got part a correct for the answer matches the professor; however, my equation could be wrong. My equation shows in the picture but I also wrote it down on the paper too. A good thing for me to clarify is that the only things that I used an equation for thus far was the cost at times 13 through 16, everything else is hardcoded in.

Please help and include all formulas, thank you very very much!

Exercise 5 - Help me with the following: My son is currently in Kindergarten. When he was born, we opened a college savings plan and currently have $5000 in his account. Assuming he starts college after he graduates from high school, how much must I put in his account each year, including the 4 years he is in college, such that $0 remain in his account upon graduation. a) What will be the cost of education (tuition only) when he is ready to start college? :F Cen,men) institution is $6,000. It is increasing at a rate of 6% per year. What will the cost Let's make the following assumptions. The current tuition for college in a public be in each of the 4 years he is in college? 13 |.jw.J7q b) Create the cash flow diagram, starting with the $5000 currently in the account 15 Fv, c%,G,e,-6eco. ) -) and noting the annual installments I will make starting at the end of year 1 through his last year in college, and note the cash outflows from the account for the 4 years he is in college. c) Determine the annual installments that I must put into his account such that so will remain in his account upon graduation. Assume a 6% interest ra ) What are the annual installments if college tuition increases at 9% per year? e) What are the annual installments if college tuition increases 9% per year, but the te. college savings plan returns only 5% per year?

Answer 1

Answer of Exercise 5:

Currently his son is in Kindergarten and has $5000 in his account.

The current tuition fee is $6000 and will increase 6% per year. Therefore during the college education period his total spending will be $12797.57 + $13365.42 +14379.35 +$ 15242.11 =$55984.45

During the remaining period is 16 years. And the remaining amount is $55984.45 - $5000 =$50984.45

Therefore, in each year, he must save $50984.45 $\div$ 16 = $3186.52

a) When he is ready to start college the tuition fee will be $ 12797.57 per year.

The cost in each of the 4 years he is in the college are 12797.57, $13365.42, $14379.35 and $15242.11 respectively.

c) the annual installment will be $ 3186.52.

d). If tuition fee increases at 9% per year his total spending during the last 4 years will be $ 84121.92.

His annual installment will be $4945.12 .