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AGA CGFM Exam - Topic 2 Question 25 Discussion

A township wants to buy a new piece of equipment that will reduce costs by $20,550 at the end of year 2. If thetownship could invest its funds at a rate of 10%, what is the most the township should spend now to get the return itdesires?
D) $20,550
A) $16,440
B) $16,983
C) $18,495

AGA CGFM Exam - Topic 2 Question 25 Discussion

Actual exam question for AGA's CGFM exam
Question #: 25
Topic #: 2
[All CGFM Questions]

A township wants to buy a new piece of equipment that will reduce costs by $20,550 at the end of year 2. If the

township could invest its funds at a rate of 10%, what is the most the township should spend now to get the return it

desires?

Show Suggested Answer Hide Answer
Suggested Answer: D

by Kattie at Feb 25, 2023, 12:00 PM

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Tula
8 months ago
Is it really that simple? I thought it would be more complicated.
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Nickole
8 months ago
I think it’s definitely A, can’t go wrong with that calculation!
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Donte
9 months ago
Wait, how do we know the investment will actually save that much?
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Earlean
9 months ago
Totally agree, A is the right choice!
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Jose
9 months ago
The future value of $20,550 at 10% for 2 years is about $16,440.
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Bobbye
9 months ago
I’m a bit confused about the calculations. I thought we might need to consider the time value of money more carefully. Could it really be as low as $16,440?
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Denny
9 months ago
I practiced a similar question where we had to find the present value for a different amount. I think the answer was lower than the future value, so maybe around $16,440 sounds right?
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Sharee
9 months ago
I'm not entirely sure, but I feel like the formula for present value is involved here. Was it something like PV = FV / (1 + r)^n?
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Nicolette
9 months ago
I think we need to calculate the present value of the $20,550 using the 10% rate. I remember something about discounting future cash flows.
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Malcom
9 months ago
Okay, let's see. I know there are some standard dashboard folders, but I'm not sure which three are mentioned here. I'll have to read the options closely.
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Arlyne
10 months ago
I've used the "data:object:upsert" command before for adding test data, so I'm leaning towards that as one of the answers. But I'll double-check the other options to make sure I'm not missing anything.
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Filiberto
1 year ago
Wait, wait, wait... are we supposed to account for inflation or something? I'm going with D. $20,550 just to be safe. Can't be too careful with these township finances, you know?
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Talia
1 year ago
Yeah, D seems like the most logical choice. Let's go with $20,550.
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Laticia
1 year ago
I agree, better to be safe than sorry. D seems like the best option.
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Sharika
1 year ago
I think we should consider inflation, so I'm going with D. $20,550.
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Mindy
1 year ago
Haha, I bet the township treasurer is just trying to get a new golf cart with this 'equipment' purchase. Either way, the answer is definitely B. $16,983.
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Haydee
1 year ago
Hmm, I'm not so sure about that. Didn't they say the township wants to 'reduce costs'? I think the answer might be C. $18,495 to get that cost reduction.
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Antonette
1 year ago
I agree with you, I also think the answer is C. $18,495 would make sense to get the cost reduction.
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Edward
1 year ago
I'm not sure about that, but I think the answer might be B. $16,983 seems like a reasonable amount to spend.
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Marya
1 year ago
I disagree, I believe the answer is A. $16,440 would be the most the township should spend.
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Henriette
1 year ago
I think the answer is D. $20,550 is the most the township should spend now to get the desired return.
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Nicolette
1 year ago
I see your point. It's all about balancing the initial investment with the long-term savings.
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Daniel
1 year ago
That's true, but if they want to see the cost reduction at the end of year 2, they might need to invest more upfront.
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Vi
1 year ago
But wouldn't it make more sense to spend less now to get the same return?
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Elly
1 year ago
I think the answer might be C. $18,495 to get that cost reduction.
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Linwood
1 year ago
I agree with Dortha, we need to calculate the present value of the future savings to determine the most the township should spend now.
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Hoa
1 year ago
I'm pretty sure the answer is B. $16,983 seems like the most the township should spend now to get the desired return of $20,550 at the end of year 2 with a 10% investment rate.
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Adrianna
1 year ago
Great, so the township should spend $16,983 to get the return it wants.
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Carmela
1 year ago
It makes sense, considering the desired return and investment rate.
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Leila
1 year ago
I agree, that seems like the most the township should spend now.
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Alexia
1 year ago
I think the answer is B. $16,983.
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Dortha
1 year ago
I disagree, I believe the answer is A) $16,440 because we need to consider the present value of the future savings.
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Antonio
1 year ago
I think the answer is D) $20,550.
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