Business Investments

Business investment
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As the owner of the business, Business goals can be achieved through the use of annuities for instance buying of end equipment. But, decisions involving finance require cautious. I this essay I will look at different investment decisions, and describe how one can use different investment vehicles to effectively accomplish business goals (Cleaves, C. et al., 2013).
In the future, I plan to expand my vinyl fence company. To achieve this goal, I must purchase a new warehouse facility. Before making any purchase, I will compare both annuities. Both options paying n interest of 8% and compounded quarterly for five years. In the budget, I am required to save $ 2,500 on each quarter.
Ordinary Annuity:
The periods of interest: 5 × 4= 20
Interest rate for the period: 0.084 = .02
20 years intersecting 2 % = 24.297
Expected future value = $ 2,500 × 24. 297 = $ 60,742.50
Amount of interest earned: $ 60,742.50 – $ 2,500 ×20 = $ 10,742.50
Interest earned:$ 10, 742.50
Annuity Due:
The periods of interest: 5 × 4= 20
Interest rate for the period: 0.084 = .02
20 years intersecting 2 % = 24.297
Expected future value: $ 2,500 24.2971+.02= $ 61,957.35
Amount of interest earned: $ 61,957.35 – $ 2,500 ×20 = $ 11, 957.35
Interest earned: $ 11, 957.35
Difference: $1,214.85
The only difference that exists between the two investments is the period at which one makes payments.

With annuity option, one begins to invest after paying the first deposit whereas I ordinary annuity you can first establish the plan and then later submit the deposit. From the above illustration, since total investment, years and the interest rate is the same, I will choose the annuity due because its future value is higher.
After a careful evaluation of my maintenance log, I found out that the molding machine requires replacement. The market price for the machine is $45,000.00. Since the machine is already approaching the end of its useful life, I therefore estimated and found out that I need to replace it with a new one in 3 years’ time. Through the sinking fund method, I need to save some money (Investor.gov, 2018).
Sinking Fund:
The periods of interest: 3 × 2= 6
Interest rate for the period: .122 = .06
6 years intersecting at 6 % = 0.1434
Sinking Fund: $ 45,000 (.0.1434) = $ 6,451.32
Investment Total: $ 6, 451.32(6) = $ 38, 707.92
Total interest: $ 45,000 – $38,707.92 = $ 6, 292.08
Interest Earned: $ 6,292.08
In this scenario sinking fund earns more interest than the other two options. The yearly amount invested for sinking fund and the other options differs by $ 2,902.64. Using an annuity and sinking fund at the same time requires a deposit that is double the amount of an annuity. I will, therefore, finance the warehouse without knowing its cost and this will increase the profits earned.
To generate more income, I would purchase the warehouse rather than being patient for five years for an annuity to mature. I would then replace the fence pole mold machine in 3 years’ time using the sinking fund option.
Finally, I would press my business to take advantage of my business. The business would pay charges, but revenues earned will neutralize the charges. Since the molding machine still works, I will continue using it as I wait for the replacement day (Cleaves, C. et al., 2013).

Reference
Cleaves, C., Hobbs, M., & Noble, J. (2013). Business Math, 10th Edition. Pearson Learning Solutions. Retrieved from: http://online.vitalsource.com/books/9781269659932Investor.gov (2018). How to Save and Save and Invest. Retrieved from https://www.investor.gov/outreach/teachers/classroom-resources/how-save-invest