A new dam project will require $48,000 a year in maintenance costs after it is complete. These maintenance costs will continue forever. Assume that the funding can be set aside in an account that earns 5% interest per year. What is the lump sump to be set aside now in order to cover the $48,000 in annual maintenance cost?

Answer rating: 100% (QA)

This scenario can be solved using the perpetuity formula which calculates the present val... View the full answer