You plan to work for Strickland Corporation for 12 years after graduation and after that want to start your own business.You expect to save and deposit $7, 500 a year for the first 6 years (t = 1 through t = 6)and $15, 000 annually for the following 6 years (t = 7 through t = 12).The first deposit will be made a year from today.In addition, your grandmother just gave you a $25, 000 graduation gift that you will deposit immediately (t = 0).If the account earns 9% compounded annually, how much will you have when you start your business 12 years from now?

Question

Quizplus · Accepted Answer

There are 3 cash flow streams: the gift and the two annuities.The gift will grow for 12 years.Then there is a 6-year annuity whose FV at the end of Year 6 will compound for an additional 6 years.Finally, there is a second 6-year annuity.The sum of the compounded values of those three sets of cash flows is the final amountrue. 11ea1b84_8b8e_b5e6_a54a_058a90d832cc_TB3581_00

You Plan to Work for Strickland Corporation for 12 Years