Question

A small company wishes to set up a fund that can be used for technology purchases over the next 6 years. Their forecast is for $16,000 to be needed at the end of year 1, decreasing by $2,000 each year thereafter. The fund earns 6% per year. How much money must be deposited to the fund at the end of year 0 to just deplete the fund after the last withdrawal

Answer 1

$55,758.47

Step-by-step explanation:

Money which must be deposited to the fund at the end of year 0:

= 16000/1.06 + 14000/1.06^2 + 12000/1.06^3 + 10000/1.06^4 + 8000/1.06^5 + 6000/1.06^6

= 16000/1.06 + 14000/1.1236 + 12000/1.191016 + 10000/1.26247696 + 8000/1.33823 + 6000/1.41852

= 55758.4640346

= $55,758.47