Question

Apple Computer wants to have $3.1 billion available 7 years from now to finance oreduction finance production of a handheld "electronic brain" that, based on your behavior, will learn how to control nearly system. The company expects to set aside uniformly increasing amounts of to meet its goal. if the amount set aside at the end of year 1 is $45 million. all the electronic devices in your home, such as the thermostat, coffee pot, TV, and sprinkler money each year ) How much will the constant increase G have to be each year? Assume the investment account grows at a rate of 14% per year. 2) Give the diagram for the arithmetic gradient series 3) What is the definition of Ar and P

Answer 1

Answer :-

Some amount is required to be set aside for 5 years to have $2,100,000,000 available in 5 years. The amount to be set aside at the end of year 1 is $50,000,000, increasing by a constant G every year thereafter. Using an interest rate of 18% per year, the value of G is required to be calculated. The series of amount set aside is an arithmetic gradient cash flow series where the first cash flow amount is S50,000,000 and the arithmetic gradient is G. Calculate the value of G as follows: 50,000,000 ( P/A, 18%, 5) + G (P/G, l 8%, 5)-(F/P, 18%, 5) $2, 100.000.000 [50,000,00 (3.1272)+G(5.2312)102.2878)-$2,100,000,000 $2,100,000,000 (156,360,000+5.2312G)- 2.2878 (156,360,000+ 5.2312G)-917,912,404.93 5.2312G 761,552,404.931 G 145,578,912.09 Therefore, the amount to be set aside should increase by $145,578,912.09 every year after year 1 for the required amount to be available at the end of five years.