Question

A manufacturer of triaxial accelerometers wants to have $2,800,000 available 10 years from now so that a new product line can be initiated. If the company plans to deposit money each year, starting one year from now, the equal amount to deposit each year at 6% per year interest in order to have the $2,800,000 available immediately after the last deposit is closest to:

Answer 1

Calculation of equal amount to deposit each year to get the future amount:

It is given that a manufacturer of triaxial accelerometers wants to have $2,800,000 available 10 years from now. So we can say that Future value is $2,800,000. We are also given that the deposit rate is 6% per year.

In order to find out the equal amount to deposit each year we need to calculate the annuity using the future value of annuity formula as follows;

Annuity = Future value of annuity / FV of $1 annuity

FV of $1 annuity (at 6% rate for 10 years) is 13.18079

Hence,

Annuity =2,800,000 / 13.18079 = 212,430.36

Hence , equal amount to deposit each year is $212,430.36