Question

Framing Art Inc. will need to purchase two new cashier machines in 2 years, at a cost of $148 each. A savings account pays 2% per year compounded quarterly. How much should Framing Art Inc. deposit now in this account to have the cash available in 2 years to pay cash for both machines

Answer 1

Farming Art Inc. should deposit $284.42

Step-by-step explanation:

Giving the following information:

Framing Art Inc. will need to purchase two new cashier machines in 2 years, for $148 each. A savings account pays 2% per year compounded quarterly.

Total cost=148*2= $296

To calculate the monetary value to deposit today, we need to use the following formula:

PV= FV/(1+i)^n

FV= 296

i= 0.02/4= 0.005

n=2*4= 8

PV= 296/1.005^8= $284.42