Question
Skyline Industries will need $1.8 million 5 years from now to replace some equipment. Currently, the firm has some extra cash and would like to
Skyline Industries will need $1.8 million 5 years from now to replace some equipment. Currently, the firm has some extra cash and would like to establish a savings account at a commercial bank for this purpose. The bank account pays 5.25 percent interest, compounded annually.
a. How much money must the company deposit at the bank today to fully fund the equipment purchase? Assume the company makes no other deposits. Show all excel calculations.
b. If the firm deposits $1,000,000 at the bank today and makes no other deposits, how many years would it take to reach the $1.8 million if the interest rate stays at 5.25% interest, compounded annually? Show all excel calculations.
c. If the firm deposits $1,000,000 at the bank today and makes no other deposits, what annual interest rate would it take to reach the $1.8 million in 5 years if the interest is compounded annually? Show all excel calculations.
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