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M. Fields, Inc., a manufacturing company, has announced its plan to accumulate $1 million in 10 years to pay off a loan. The company's management believes that they can achieve their goal by making annual deposits and earning an annual rate of 12%.
To achieve this goal, M. Fields, Inc. needs to calculate the amount they need to deposit annually. The calculation requires the company to consider the present value of the loan, the future value of the loan, the time period, and the interest rate. By using a financial calculator, the company can calculate the annual deposit needed to accumulate $1 million in 10 years.
According to the calculation, M. Fields, Inc. needs to make an annual deposit of $47,516.44 for 10 years starting at the end of the first year. By doing so, the company will accumulate $1 million in 10 years, assuming an annual rate of 12%.
However, if the company earns more than 12% annually, they may not need to deposit $47,516.44 every year. Conversely, if the company earns less than 12% annually, they may need to deposit more than $47,516.44 every year.
To ensure that the company achieves its goal, the management needs to monitor the investment regularly. They need to keep track of the performance of the investment and adjust the deposit accordingly. Moreover, they need to consider the tax implications of the investment and make sure that the investment aligns with the company's financial goals and risk tolerance.
The decision to save $1 million in 10 years is crucial for M. Fields, Inc. The company needs to balance its short-term and long-term financial goals. It is essential that the company does not compromise its cash flow and liquidity by making excessive deposits.
Furthermore, the company needs to consider the opportunity cost of making annual deposits. By depositing a significant amount of money annually, the company may miss out on other investment opportunities that may yield higher returns. The management should evaluate other investment options and compare the potential returns before deciding on the annual deposit.
In conclusion, M. Fields, Inc. has set a goal to accumulate $1 million in 10 years to pay off a loan. The company needs to calculate the annual deposit required to achieve this goal, considering the interest rate, time period, and present and future value of the loan. The company needs to monitor the investment regularly and adjust the deposit accordingly. The management should balance the company's short-term and long-term financial goals and consider the opportunity cost of making annual deposits.
Ticker: MFLD
