Phoenix Corporation Is Depositing Equal Sums of Money at the Beginning

question 37

Essay

Phoenix Corporation is depositing equal sums of money at the beginning of every three months into a sinking fund to redeem a $165 000.00 promissory note due 11 years from now.Interest earned by the fund is 4.6% compounded quarterly.
a)Determine the size of the quarterly payments into the sinking fund.
b)Compute the balance in the fund after 6 years.
c)Compute the increase in the fund during the 25th payment interval.
d)Construct a partial sinking fund schedule showing details of the first three deposits,the last three deposits,and totals.

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Definitions:

Contribution Margin

The revenue remaining after deducting variable costs, which can be used to cover fixed costs and contribute to profit.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Fixed Costs

Expenses that do not change with the level of production or sales activities within a reasonable scale.

Depreciation Expense

The allocation of the cost of an asset over its useful life to gradually reduce its value on the balance sheet.