A company is considering buying workstation computers to support its engineering staff. In today's dollars, it is estimated that the maintenance costs for the computers (paid at the end of each year) will be $20,000, $26,000, $34,000, $38,000, and $42,000 for years one through five, respectively. The general inflation rate (f) is estimated to be 10% per year, and the company will receive 16% per year on its invested funds during the inflationary period. The company wants to pay for maintenance expenses in equivalent equal payments (in actual dollars) at the end of each of the five years. Find the amount of the company's annual payment.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A company is considering buying workstation computers to support its engineering staff. In today's dollars, it is estimated that the maintenance costs for the computers (paid at the end of each year) will be $20,000, $26,000, $34,000, $38,000, and $42,000 for years one through five, respectively. The general inflation rate (f) is estimated to be 10% per year, and the company will receive 16% per year on its invested funds during the inflationary period. The company wants to pay for maintenance expenses in equivalent equal payments (in actual dollars) at the end of each of the five years. Find the amount of the company's annual payment.

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