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Business Math

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You are the owner of a Jani-King cleaning service franchise. Your accountant has determined that your business will need $27,500 in new equipment in 3 years. If your bank is paying 6% interest compounded monthly, how much must you invest today to meet this financial goal? (Round to the nearest whole dollar.)

  • Business Math -

    P = Po(1+r)^n

    P = $27,500

    Po = Initial investment.

    r = (6%/12)/100% = 0.005 = Monthly % rate expressed as a decimal.

    n = 12comp/yr. * 3yrs = 36 Compounding
    periods.

    P = Po(1.005)^36 = 27500
    Po = 27500/(1.005)^36 = $22,980.

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