Separate escrow account to meet certain pension obligations

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1. JLK Corp is setting aside $1 million at the beginning of each year in a separate escrow account to meet certain pension obligations in 20 years. The funds in the account are expected to earn 6% interest each year. Find out how much JLK Corp will have at the end of 20 years to meet its obligations.

2. Digital Corp has decided to update all of its computers and it has decided on the model and features of the new computers. It has received bids from two vendors. The first bid is for DC to pay $950,000 immediately. The second bid is for Digital corp to pay $200,000 at the end of each year for 5 years. If Digital corp faces an opportunity cost of 8.5%, which bid should DC accept?

3. (RPI) is considering the purchase of an apartment complex that is priced at $5,000,000. It expects to receive a rental income of $600,000 each year from the apartments. It estimates that the maintenance and administrative costs will be $150,000 each year. Additionally, it expects to spend about $800,000 for repairs in 5 years. At the end of 10 years, it expects to sell the apartment complex for $7,000,000. If RPI requires a return of 10% on its investments, should it make this investment?

Reference no: EM131571484

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