Question

Labco Scientific sells high-purity chemicals to universities, research laboratories, and pharmaceutical companies. The company wants to invest in new equipment that will reduce shipping costs by better matching the size of the completed products with the size of the shipping container. The new equipment is estimated to cost $440,000 to purchase and install. How much must Labco save each year for 5 years in order to justify the investment at an interest rate of 11% per year?

Answer 1

$119,050.936

Step-by-step explanation:

Given:

Present Value (Pv) = $440,000

Number of year (n) = 5 year

Rate = 11 % = 11/100 = 0.11

Saving per year (c) = ?

Calculation:

`PV = c[(1-(1+i)^(-n))/(i) ]\\440,000 = c[(1-(1+0.11)^(-5))/(0.11) ]\\\\440,000 = c[(1-0.593451328)/(0.11) ]\\\\440,000 = c(0.406548672)/(0.11)\\ 440,000 = c1(3.69589702)\\444,000/3.69589702 = c\\119,050.936 = c`

Saving per year = $119,050.936