S.western Moving Sale & Storage wants to have enough money to purchase a new tractor-trailor in 5 years at a cost of $290,000. If the company sets aside $100,000 in year 2 and $75,000 in year3 , how much will the company have to set aside in year 4 in order to have the money it needs if the money set aside earns 9% per year?

Question

S.western Moving Sale & Storage wants to have enough money to purchase a new tractor-trailor in 5 years at a cost of $290,000.  If the company sets aside $100,000 in year 2 and $75,000 in year3 , how much will the company have to set aside in year 4 in order to have the money it needs if the money set aside earns 9% per year?

tkhunny · Answer

r = 1+0.09 -- The annual accumulation factor.
U = Unknown Deposit

Just draw the map!

Year 2: 100000
Year 3: 100000r + 75000
Year 4: 100000r^2 + 75000r + U
Year 5: 100000r^3 + 75000r^2 + Ur = 290000

Solve for U.