Samuelson Engines wants to save $750,000 to buy some new equipment four years from now.The plan is to set aside an equal amount of money on the first day of each quarter starting today.The firm can earn 4.75 percent on its savings.How much does the firm have to save each quarter to achieve its goal?

Question

Quizplus · Accepted Answer

The correct answer is A. $42,337.00.To calculate the quarterly savings, we can use the future value of an annuity formula:FV = PMT * (((1 + r)^n - 1) / r)where:FV is the future value of the annuityPMT is the periodic paymentr is the interest rate per periodn is the number of periodsIn this case, we have:FV = $750,000r = 4.75% / 4 = 1.1875%n = 4 * 4 = 16Substituting these values into the formula, we get:$750,000 = PMT * (((1 + 0.011875)^16 - 1) / 0.011875)$750,000 = PMT * 16.386294Solving for PMT, we get:PMT = $750,000 / 16.386294PMT = $42,337.00Therefore, the firm has to save $42,337.00 each quarter to achieve its goal.

Samuelson Engines Wants to Save $750,000 to Buy Some New