Alex has set up a sinking fund for his son's college education in 10 years. From now on, he can save from his part-time job and deposit $3,000 at the beginning of each year in an account that pays 7.2% compounded annually.What is the balance of the account after 10 years of saving?After 10 years, his son reccived a full scholarship. Alex wishes to invest all his money in a project expected to generate annual cash flows of $10,000 for a period of 5 ycars. What is the NPV of the project if the discount rate is 8%?Should Alex invest in the project? Why?

Sinking funds are amount of deposit required for the future planning requirements needed in the…

Answered: ex has set up a sinking fund for his…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 8E

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Alex has set up a sinking fund for his son's college education in 10 years. From now on, he can save from his part-time job and deposit $3,000 at the beginning of each year in an account that pays 7.2% compounded annually.

What is the balance of the account after 10 years of saving?
After 10 years, his son reccived a full scholarship. Alex wishes to invest all his money in a project expected to generate annual cash flows of $10,000 for a period of 5 ycars. What is the NPV of the project if the discount rate is 8%?Should Alex invest in the project? Why?

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