A company has invested in a new machine for its production line. The initial cost of the machine is $12,000 and it is expected to last for five years with no salvage value at that time. Annual operation costs are anticipated to be relatively constant at $750 per year. However, due to heavy use and degradation, the maintenance costs are expected to increase each year. A best guess for the annual maintenance costs are shown in Table P2.10. Determine how much money should be invested in a fund that earns 6% annually, compounded monthly, in order to completely pay for this machine.

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TABLE P2.10 Expected Yearly Maintenance Cost Year 234 10 2 3 5 Expected Maintenance Cost $1,000 $1,400 $1,900 $2,600