Unit 6: Instructor Graded Assignment
Unit 6 focus on
business investment concepts covered in your reading of Chapter 14: “Annuities
and Sinking Funds.”
For this Assignment you will write an essay to address
the requirements described below. Your essay must be carefully planned and written
using well-constructed sentences and paragraphs. Make sure that your grammar
and spelling are correct. Points will be awarded for content as well as composition.
Your essay must be a minimum of 1 page in length with standard 1 inch margins
and is required to have at least one reference from a reliable source. This means
that you cannot use sites like Wikipedia, Ask.com®, and Yahoo® answers and that
only references from reliable sources will earn points. All resources should be
cited both as an in-text citation as well as being listed on a reference page
in APA format.
be submitted as a Microsoft® Word® document and uploaded to the Dropbox for Unit 6. Include your essay
directly in this document following the instructions.
is to write an essay discussing how you, as a business owner, can use annuities
to achieve business goals. Financial decisions require careful planning and
prioritizing, especially when large, capital-intensive purchases are involved.
As you establish a process to achieve your company goals, you will need to
demonstrate your math skills, consider different investment options, and
describe how different investment vehicles can be used effectively to
accomplish business goals.
As the owner of a
vinyl fencing company, you are making plans for two large purchases in the next
3 to 5 years to achieve your business goals.
You plan to expand your vinyl fence company in the future, and must purchase a
new warehouse facility to achieve this goal. Your insurance company is offering
you two very attractive investment options, an ordinary annuity and an annuity
due, both compounding quarterly and paying 8% annual interest over a 5-year
period. Your 5-year budget includes saving $2,500.00 each quarter. To evaluate
which option will benefit the business most, you must evaluate both annuity
options by calculating the future value of each option and explain how the
investment will help you to carry out your goals.
After careful review of your maintenance log, you also realized that you will
need to replace a fence post molding machine that sells for $45,000.00. You
estimate that you will need to purchase a new machine in 3 years’ time as this
machine reaches the end of its useful life. You plan to save for this purchase using
a sinking fund that compounds semi-annually, and earns a 12% annual rate.
Your essay should
in include the following information
1. Calculate the future value of both the ordinary
annuity and the annuity due options being offered by your insurance company.
Explain the differences between these two investment options. Select the best
annuity option for your business and explain why that option is preferable.
2. Calculate the sinking fund payment required for
the fence post molding machine.
3. Compare and contrast the shorter timeframe and
higher interest rate of the sinking fund with the longer term warehouse annuity
option you chose. Be sure to calculate and report how much interest you will
earn from the annuity chosen for the warehouse and the amount of the sinking
4. Develop a plan to prioritize these two
purchases, and discuss the potential impact that these will have on the future
of your business. For example, is expanding your business more important than
saving for and paying cash for a fence post molding machine? Remember, you
could borrow money to finance the fence post molding machine when it eventually
breaks, but financing will cost the business in finance charges.
Remember, this Assignment is worth 40 points so
it should be complete and cover each point as outlined above. Be sure to
include at least one APA formatted reference.
You may submit your Assignment to the Math
Center for review. Tutors will not grade or correct the Assignment, but they
will provide guidance for improvement. In addition, tutors will not help you
find websites for the Assignment. Be sure to submit Assignments early enough to
receive feedback and make corrections before the Assignment due date (24 hour
turn-around times Monday-Thursday and 48 hour turn-around times on weekends are
typical). Email Assignments to: email@example.com. Please put “MM255 Assignment Review” in the subject
line of the message.
Critical elements for Writing:
Essay should include a highly developed viewpoint and purpose.
Assignment is written in Standard American English and demonstrates superior
organization. 3. Communication is highly
ordered, logical and unified.
The assignment displays exceptional content, organization, style and