The Proprietor of Carson Hardware Store Has Decided to Set

question 36

Short Answer

The proprietor of Carson Hardware Store has decided to set up a sinking fund for the purpose of purchasing a computer 3 yr from now. It is expected that the purchase will involve a sum of $30,000. The fund grows at the rate of where A denotes the size of the fund at any time t, r is the annual interest rate earned by the fund compounded continuously, and P is the amount (in dollars) paid into the fund by the proprietor per year (assume this is done on a frequent basis in small deposits over the year so that it is essentially continuous). If the fund earns 8% interest per year compounded continuously, determine the size of the yearly investment the proprietor should pay into the fund. Round the answer to the nearest dollar. $__________

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Definitions:

Periodic Inventory System

An accounting method in which inventory levels and cost of goods sold are determined at the end of an accounting period based on a physical count.

Gross Method

An accounting approach that documents purchases at their complete invoice cost without subtracting any offered cash rebates.

Credit Terms

The conditions under which credit will be extended to a customer, including the repayment period, interest rate, and any discounts for early payment.

Gross Margin Ratio

A financial metric expressing the percentage of revenue that exceeds the cost of goods sold, used to assess a company's financial health.