A northern California consulting firm wants to start saving money for replacement of network servers. If the company invests $5000 at the end of year 1 but decreases the amount invested by 5% each year, how much will be available 5 years from now at an earning rate of 8% per year?
What will be an ideal response?
First find P g and then convert to F
P g = 5000[1 – (0.95/1.08) 5 ]/(0.08 + 0.05)
= $18,207
F = 18,207(F/P,8%,5)
= 18,207(1.4693)
= $26,751
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What will be an ideal response?
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