Question 1
The following data pertain to an investment proposal:
| Cost of investment | $90,000 |
| Annual cost savings | $20,000 |
| Expected life of investment | 5 years |
What is the present value of the proposed investment?
Question 2
Jonathan, a student at Local University, has decided to major in accounting because his goal is to become an FBI agent. Jonathan knows that accounting is one of the entry programs that qualify an applicant for a special agent career. As most students do, Jonathan wants to purchase a nice car when he graduates in five years with his master's degree. Because his expected salary will be good, he wants a high-performance sports car. He has found the car of his dreams for $58,000. Jonathan's parents have promised him a graduation present of $25,000 when he finishes his master's degree.
Required:
| a. | Calculate how much money Jonathan needs to deposit in his savings account today to |
be able to pay cash for the car upon graduation, assuming that his parents contribute what Jonathan expects. Jonathan can earn 8% on his deposit, compounded annually.
| b. | Calculate how much money Jonathan needs to deposit in his savings accountant today |
to be able to pay cash for the car upon graduation, assuming that his parents contribute what Jonathan expects. Jonathan can earn 8% on his deposit, compounded semi-annually.
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