Northwest Iron and Steel is considering getting involved in electronic commerce. A modest e-commerce package is available for $30,000. The company wants to recover the cost in 2 years. Find the equivalent amount of new revenue that must be realized every 6 months at an interest rate of 3% per quarter using (a) factor formula, and (b) a single-cell spreadsheet function that includes an EFFECT function.
What will be an ideal response?
(a) Need effective i per PP of 6 months
i/6 months = (1 + 0.03) 2 – 1= 0.0609
A = 30,000(A/P,6.09%,4)
= 30,000{[0.0609(1 + 0.0609) 4 ]/[(1 + 0.0609) 4 -1]}
= 30,000(0.28919)
= $8675.70 per 6 months
(b) = PMT(EFFECT(6%,2),4,30000) displays $8675.59 per 6 months
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