Business Investments – Cheap Research Essays

Unit 6 focus on business investment concepts covered in your reading of Chapter 14: “Annuities and Sinking Funds.”

For this Assignment you will write an essay to address the requirements described below. Your essay must be carefully planned and

written using well-constructed sentences and paragraphs. Make sure that your grammar and spelling are correct. Points will be awarded

for content as well as composition. Your essay must be a minimum of 1 page in length with standard 1 inch margins and is required to

have at least one reference from a reliable source. This means that you cannot use sites like Wikipedia, Ask.com®, and Yahoo® answers

and that only references from reliable sources will earn points. All resources should be cited both as an in-text citation as well as

being listed on a reference page in APA format.

Assignments must be submitted as a Microsoft® Word® document and uploaded to the Dropbox for Unit 6. Include your essay directly in

this document following the instructions.
Essay Assignment

Your Assignment is to write an essay discussing how you, as a business owner, can use annuities to achieve business goals. Financial

decisions require careful planning and prioritizing, especially when large, capital-intensive purchases are involved. As you establish

a process to achieve your company goals, you will need to demonstrate your math skills, consider different investment options, and

describe how different investment vehicles can be used effectively to accomplish business goals.

Scenario:

As the owner of a vinyl fencing company, you are making plans for two large purchases in the next 3 to 5 years to achieve your business

goals.

Purchase 1:

You plan to expand your vinyl fence company in the future, and must purchase a new warehouse facility to achieve this goal. Your

insurance company is offering you two very attractive investment options, an ordinary annuity and an annuity due, both compounding

quarterly and paying 8% annual interest over a 5-year period. Your 5-year budget includes saving $2,500.00 each quarter. To evaluate

which option will benefit the business most, you must evaluate both annuity options by calculating the future value of each option and

explain how the investment will help you to carry out your goals.

Purchase 2:
After careful review of your maintenance log, you also realized that you will need to replace a fence post molding machine that sells

for $45,000.00. You estimate that you will need to purchase a new machine in 3 years’ time as this machine reaches the end of its

useful life. You plan to save for this purchase using a sinking fund that compounds semi-annually, and earns a 12% annual rate.
Your essay should in include the following information

1. Calculate the future value of both the ordinary annuity and the annuity due options being offered by your insurance company.

Explain the differences between these two investment options. Select the best annuity option for your business and explain why that

option is preferable.

2. Calculate the sinking fund payment required for the fence post molding machine.

3. Compare and contrast the shorter timeframe and higher interest rate of the sinking fund with the longer term warehouse annuity