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4 10calc A U S auto maker plans to build two more plants in China a

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4-10calc A U.S. auto maker plans to build two more plants
in China as it aims to harness continued growth in Asia.
The company estimates that it must make annual
investments of $40 thousand over a 15-year period. How
much would the company have to invest now at an interest
rate of 3% per year to sufficiently provide for the annual
payments, if the first payment will begin 4 years from now?
Specify answer to nearest cent
Solution
This is a two-step problem:
1) We need to find the PV when PMT = $40,000 and N =
15 and I/Y = 3%. [This is an annuity due].
2) We need to use the PV calculated above and change it
to FV and find for PV using N = 4 and I/Y = 3%.
1) PV of cash flows = PMT * [{1

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4-10calc A U.S. auto maker plans to build two more plants in China as it aims to harness continued growth in Asia. The company estimates that it must make annual investments of $40 thousand over a 15 -year period. How much would the company have to invest now at an interest rate of 3% per year to su ...
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