Question

On January 15, 2017, Everett Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2021, at an estimated cost of $8,000,000. Everett plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2017.

Dolan should make four annual deposits of $______________ (Please show steps)

Answer 1

We are given,

Future Value(FV) = $8,000,000

Interest rate = 10%

Time = 4 years

Annual deposits(pmt) = ?

The first payment is made at the beginning of the year.

We can calculate pmt by using a financial calculator or using excel,

Formula in excel =PMT(rate, nper, pv, [fv], [type])

Putting in the values we get,

Future Value	8,000,000
rate	10%
no periods	4
pmt	1,567,060.39	(=PMT(10%,4,0,-8,000,000,1)

Hence annual deposits will be of $1,567,060.39.

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