Question

On January 15, 2020, Dolan Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2024, at an estimated cost of $8,000,000. Dolan 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, 2020. Future value factors are as follows: Dolan should make four annual deposits ofA. $2,000,000 B. $1,567,060 C. $1,723,766. D. 54,967,401

Answer 1

Annual deposit (PMT) = $1,567,060.39

Step-by-step explanation:

Given:

Future value of annuity due = $8,000,000

Rate of interest(r) = 10% = 0.1

Number of year (n) = 4 year

Annual deposit (PMT) = ?

Computation of annual deposit :

`Future\ value\ of\ annuity\ due = PMT [((1+r)^n-1)/(r) ](1+r)\\\\8,000,000 = PMT [((1+0.1)^4-1)/(0.1) ](1+0.1)\\\\8,000,000 = PMT [((1.1)^4-1)/(0.1) ](1.1)\\\\8,000,000 = PMT [((0.4641)/(0.1) ](1.1)\\\\8,000,000 = PMT [5.1051]\\PMT = 1,567,060.39`

Annual deposit (PMT) = $1,567,060.39