AutomationDirect, which makes 6-inch TFT color touch screen HMI panels, is examining its cash flow requirements for the next 5 years. The company expects to replace office machines and computer equipment at various times over the 5-year planning period. Specifically, the company expects to spend $7000 two years from now, $9000 four years from now, and $15,000 five years from now. What is the annual worth over years 1 through 5 of the planned expenditures at an interest rate of 10% per year? Also, write the single-cell spreadsheet function to find A.
What will be an ideal response?
Find P in year 0 and then convert to A in years 1-5
P = 7000(P/F,10%,2) + 9000(P/F,10%,4) + 15,000(P/F,10%,5)
= 7000(0.8264) + 9000(0.6830) + 15,000(0.6209)
= $21,245.30
A = 21,245.30(A/P,10%,5)
= 21,245.30(0.26380)
= $5605
Spreadsheet: = PMT(10%,5,PV(10%,2,,7000)+PV(10%,4,,9000)+PV(10%,5,,15000))
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