Apple Computer wants to have $2.1 billion available 5 years from now in order to finance initial production of a device that, based on your behavior, will learn how to monitor and control nearly all of the electronic devices in your home, such as thermostat, coffee pot, TV, sprinkler system, etc. using Internet of Things (IOT) technology. The company expects to set aside uniformly increasing amounts of money each year to meet its goal. If the amount set aside at the end of year 1 is $100 million, how much will the uniform increase, G, have to be each year? Assume the investment funds grow at a rate of 18% per year.
What will be an ideal response?
In $ billion units,
P = 2.1(P/F,18%,5)
= 2.1(0.4371)
= 0.91791 = $917,910,000
917,910,000 = 100,000,000(P/A,18%,5) + G(P/G,18%,5)
917,910,000 = 100,000,000(3.1272) + G(5.2312)
G = $115,688,561
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