AGA Exam CGFM 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?

A$16,440

B$16,983

C$18,495

D$20,550

Show Suggested Answer

Suggested Answer: D

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

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Filiberto

1 months 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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Sharika

20 days ago

I think we should consider inflation, so I'm going with D. $20,550.

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Mindy

1 months 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 months 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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Vi

2 days ago

But wouldn't it make more sense to spend less now to get the same return?

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Elly

18 days ago

I think the answer might be C. $18,495 to get that cost reduction.

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Linwood

2 months 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

2 months 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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