A company makes fixed annual payments to a sinking fund to replace equipment in five years’ time. The equipment is valued at £200,000 and interest rates are 10%. How much should each payment be? How would these payments change if the company could put an initial £20,000 into the fund?

A company makes fixed annual payments to a sinking fund to replace equipment in five years’ time. The equipment is valued at £200,000 and interest rates are 10%. How much should each payment be? How would these payments change if the company could put an initial £20,000 into the fund?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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