Jim Bowie is trying to determine the amount to set aside so that he will have enough
Question:
Jim Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 4 years to overhaul the engine on his vintage truck. While there is some uncertainty about the cost of engine overhauls in 4 years, by conducting some research online, Jim has developed the following estimates.
Engine Overhaul Probability
Estimated Cash Outflow Assessment
$ 500 ............10%
1,200 ............25%
2,000 ............50%
2,500 ............15%
Instructions
How much should Jim Bowie deposit today in an account earning 4% compounded annually, so that he will have enough money on hand in 4 years to pay for the overhaul?
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Related Book For
Intermediate Accounting
ISBN: 978-1118147290
15th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
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