Beaver & Crampson took out a loan for specialized manufacturing equipment requiring 7 large loan payments in the future. The company will make the first loan payment of $19034 at the end of year 10, with each subsequent payment decreasing by 9%.

The company would like to save for these large loan payments by making 9 equal deposits at the end of each year (beginning in year 1). What amount must the company deposit each year in order to make the future loan payments? Assume an interest rate of 6% compounded annually.

Note: The first loan payment will be made at the end of year 10. The company will make a total of 7 loan payments. The first deposit will be made at the end of year 1. The company will make a total of 9 deposits.

 

Answer rating: 100% (QA)

We can solve this problem by calculating the present value of all future loan payments and then equa... View the full answer