A material supplier won a 5-year contract to supply a construction company with all their building materials needs. The contract is expected to generate a first-year profit of $12,000. This annual profit is expected to increase by $6,000 each successive year for the rest of the contract period. The profits will be invested in an account earning an interest rate of 7%per year. (a) Assuming that the profits are deposited in the account at the end of each year, how much money will be in the account immediately after the last deposit is made? (b) What is the equivalent uniform annual deposit?
A material supplier won a 5-year contract to supply a construction company with all their building materials needs. The contract is expected to generate a first-year profit of $12,000. This annual profit is expected to increase by $6,000 each successive year for the rest of the contract period. The profits will be invested in an account earning an interest rate of 7%per year. (a) Assuming that the profits are deposited in the account at the end of each year, how much money will be in the account immediately after the last deposit is made? (b) What is the equivalent uniform annual deposit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A material supplier won a 5-year contract to supply a construction company with all their building materials needs. The contract is expected to generate a first-year profit of $12,000. This annual profit is expected to increase by $6,000 each successive year for the rest of the contract period. The profits will be invested in an account earning an interest rate of 7%per year.
(a) Assuming that the profits are deposited in the account at the end of each year, how much money will be in the account immediately after the last deposit is made?
(b) What is the equivalent uniform annual deposit?
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