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5) A property owner must replace a roof this month at the cost of $30,000. He...

5) A property owner must replace a roof this month at the cost of $30,000. He wants to put money aside to replace the roof at the end of its economic life in 20 years. Inflation is 2.75%. He can invest funds at 6.5%. How much must he put aside each month in order to replace the roof in 20 years? 6) In question 5, what is the process called and what type of function is it?

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Answer #1
PV of roof = 30,000
Period = 20 years
Inflation = 2.75%
Calculating inflation adjusted price of roof after 20 years
Excel formula Future value of Roof
=FV(2.75%,20,0,-30000,0) 51,612.85
So the price of roof would be $51,612.85 after 20 years
Calculating monthly payment
Excel formula Monthly payment
=PMT(6.5%/12,20*12,0,-51612.85,0) 105.24
Answer :
$105.24 per month he should put aside to replace the roof in 20 years
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