SOLUTION: The CEO has decided to plan for a salary action affecting a number of individuals in the organization. He has decided to give a $2,000 cost-of-living pay increase to all hourly emp
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Question 854362: The CEO has decided to plan for a salary action affecting a number of individuals in the organization. He has decided to give a $2,000 cost-of-living pay increase to all hourly employees and a $4,000 increase to all software analysts with salaries less than $55,000.
However, he wants to do this in 2 years. He wants you to give him two options (you do not have to recommend an option).
Option 1: How much would he have to invest today in a single lump sum at a 6% annual interest rate compounded quarterly to have sufficient funds to execute his plan?
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
The CEO has decided to plan for a salary action affecting a number of individuals in the organization. He has decided to give a $2,000 cost-of-living pay increase to 35 hourly employees and a $4,000 increase to 18 software analysts with salaries less than $55,000.
However, he wants to do this in 2 years. He wants you to give him two options (you do not have to recommend an option).
Option 1: How much would he have to invest today in a single lump sum at a 6% annual interest rate compounded quarterly to have sufficient funds to execute his plan?
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Cost for 35 hourly employees : 35*2000 = 70000
Cost for 18 software analyst's with
salaries less than 55000 ?:: 18*4000 = 72000
-------
A(t) = P(1+(r/n))^(nt)
142000 = P(1+(0.06/4))^(4*2)
142000 = P(1.1265)
----
P = 142000/1.1265 = $126,054.1 (amt. he needs to invest)
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Cheers,
Stan H.
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