Maintenance money for an athletic complex has been sought. Mr. Kendall, the Athletic Director, would like to solicit a donation to cover all future expected maintenance costs for the building. These maintenance costs are expected to be $1.2 million each year for the first five years, $1.5 million each year for years 6 through 10, and $1.7 million each year after that. (The building has an indefinite service life.) If the money is placed in an account that will pay 5% interest compounded annually, how large should the gift be?
Maintenance money for an athletic complex has been sought. Mr. Kendall, the Athletic Director, would like to solicit a donation to cover all future expected maintenance costs for the building. These maintenance costs are expected to be $1.2 million each year for the first five years, $1.5 million each year for years 6 through 10, and $1.7 million each year after that. (The building has an indefinite service life.) If the money is placed in an account that will pay 5% interest compounded annually, how large should the gift be?
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 39P
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Transcribed Image Text:Maintenance money for an athletic complex has been sought. Mr. Kendall, the Athletic Director, would like to solicit a donation to cover all future expected maintenance costs for the building. These maintenance costs are
expected to be $1.2 million each year for the first five years, $1.5 million each year for years 6 through 10, and $1.7 million each year after that. (The building has an indefinite service life.)
If the money is placed in an account that will pay 5% interest compounded annually, how large should the gift be?
Click the icon to view the interest factors for discrete compounding when i = 5% per year.
The gift should be $ million. (Round to two decimal places.)
- X
More Info
Single Payment
N
1
2
3
4
5
6
7
8
9
10
Compound
Amount
Factor
(F/P, i, N)
1.0500
1.1025
1.1576
1.2155
1.2763
1.3401
1.4071
1.4775
1.5513
1.6289
Present
Worth
Factor
(P/F, i, N)
0.9524
0.9070
0.8638
0.8227
0.7835
0.7462
0.7107
0.6768
0.6446
0.6139
Compound
Amount
Factor
(F/A, i, N)
1.0000
2.0500
3.1525
4.3101
5.5256
6.8019
8.1420
9.5491
11.0268
12.5779
Equal Payment Series
Sinking Present
Fund
Worth
Factor
Factor
(A/F, i, N)
(P/A, i, N)
1.0000
0.9524
0.4878
1.8594
0.3172
2.7232
0.2320
3.5460
0.1810
4.3295
0.1470
5.0757
0.1228
5.7884
0.1047
6.4632
0.0907
7.1078
0.0795
7.7217
Capital
Recovery
Factor
(A/P, i, N)
1.0500
0.5378
0.3672
0.2820
0.2310
0.1970
0.1728
0.1547
0.1407
0.1295
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