Tuscarora Transportation is expected to require $450,000 to replace part of their fleet trucks in six years time. What yearly contribution at the end of each year will the company have to make to an investment paying 12% per annum to have sufficient money to purchase the trucks?

Question

Quizplus · Accepted Answer

The future value of the yearly contribution at the end of each year for six years at 12% per annum can be calculated using the future value of an annuity formula:FV = PMT * [(1 + r)^n - 1] / rwhere:FV is the future valuePMT is the yearly contributionr is the annual interest raten is the number of yearsIn this case, we have:FV = $450,000r = 12%n = 6Substituting these values into the formula, we get:$450,000 = PMT * [(1 + 0.12)^6 - 1] / 0.12$450,000 = PMT * 8.306PMT = $450,000 / 8.306PMT = $54,230.43Therefore, the yearly contribution at the end of each year for six years at 12% per annum is $54,230.43.

Tuscarora Transportation Is Expected to Require $450,000 to Replace Part