For the Sinking Funds, Use Table 12-1 from Your Text

question 129

Short Answer

For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent: $\begin{array}{llllll}\text { Sinking Fund } & \text { Payment } & \text { Time } & \text { Nominal } & \text { Interest } & \text { Future Value } \\\underline { \text { Payment }} &\underline { \text { Frequency }} & \underline{\text { Period }} & \underline{\text { Rate }} &\underline {\text { Compounded }}&\underline {\text { (Objective })}\\& \text { every } 6 \text { months } & 15 \text { years } & 8 \% & \text { semiannually } & \$ 600\end{array}$

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Definitions:

Profitability Index

A financial tool used to evaluate the desirability of an investment or project by dividing the present value of future cash flows by the initial investment.

Net Present Value

A calculation that determines the present value of future cash flows, discounted at a specific rate, to evaluate the profitability of an investment.

Investment Allowance

Investment allowance is a tax incentive that allows businesses to deduct a certain percentage of their investment in assets from their taxable income.

Operating Revenue

Income generated from a company's core business activities, excluding income from investments or secondary sources.