A small company wishes to set up a fund that can be used for

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 $22,000 to be needed at the end of year 1, decreasing by $2,000 each year thereafter. The fund earns 10% per year. How much money must be deposited to the fund at the end of year O to just deplete the fund after the last withdrawal?

Solution

v

Year	Amt received	PVF @ 10%	Present value
0	0	1	0
1	22000	0.909091	20000
2	20000	0.826446	16528.93
3	18000	0.751315	13523.67
4	16000	0.683013	10928.22
5	14000	0.620921	8692.899
6	12000	0.564474	6773.687
Present value of Cash flows	76447.39
Investment required in Yr-0: $ 76447.39