# PART TWOFinancial ToolsE5-4Your firm has the option of making\$130,000 today but will save the company money over several years. You estimatethat the software will provide the savings shown in the following table over its5-year life.an investment in new software that will costYearSavings estimate1\$35,000250,000345,000425,00015,000Should the firm make this investment if it requires a minimum annual return of 9%on all investments?Joseph is a friend of yours. He has plenty of money but little financial sense. Hereceived a gift of \$12,000 for his recent graduation and is looking for a bank inwhich to deposit the funds. Partners' Savings Bank offers an account with an annualinterest rate of 3 % compounded semiannually, whereas Selwyn's offers an accountwith a 2.75% annual interest rate compounded continuously. Calculate the value ofthe two accounts after 1 year, and recommend to Joseph which account he shouldchoose.E5-5E5-6 Jack and Jill have just had their first child. If they expect that college will cost\$150,000 per year in 18 years, how much should the couple begin depositingannuallypay 1 year of tuition 18 years from now? Assume they can earn a 6% annual rateat the end of each of the next 18 years to accumulate enough funds toof return on their investment.XThe MyAll problems are available in MyLab Finproblems in Excel format available in Mdicatesan

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Questions E5-6

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Step 1

Calculation of Annual Deposits:

The annual deposit is \$4,853.48.

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