On January 15 Year 5 Carr Corp adopted a plan to accumulate

On January 15, Year 5, Carr Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, Year 9, at an estimated cost of $2 million. Carr plans to make 4 equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, Year 5. Future value factors are as follows:

Future value of 1 at 10% for 5 periods

1.61

Future value of ordinary annuity of 1 at 10% for 4 periods

4.64

Future value of annuity in advance of 1 at 10% for 4 periods

5.11

Carr should make 4 annual deposits (rounded) of

$320,000

$431,000

$391,400

$500,000

Solution

Answer

391400

the 4 annual deposit are

future value of annuity in advance of 1 at 10 % for 4 period = 5.11

annual deposit = 2000000 * 5.11

= 391389.43

= 391400