Question

Carman Dog Care Co. wants to finance a new animal shelter by making eight eight annual deposits into a fund earning 3​% compounded annually. The first four four deposits are to be $25,000 each and will be paid at the beginning of the next four four years. The last four four deposits are to be $26,000 each and will be paid at the beginning of the last four four years.

Requirement What is the cost of the new animal​ shelter?

​(Use the present value and future value​ tables, the formula​ method, a financial​ calculator, or a spreadsheet for your calculations. Use the same method for all calculations. If using present and future value tables or the formula​ method, use factor amounts rounded to five decimal​ places, X.XXXXX. Round intermediary currency computations and your final answer to the nearest​ cent, $X.XX.)

Answer 1

Cost will be equal to future value of funds deposited

i.e. 25000(1.03)^8 + 25000(1.03)^7 + 25000*(1.03)^6 + 25000*(1.03)^5 + 26000*(1.03)^4 + 26000*(1.03)^3 + 26000(1.03)^2 + 26000(1.03)

= $233,286.79

Hence, cost of animal shelter = $233,286.79