On January 15, 2018, Dolan Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2022, at an estimated cost of £8,000,000. Dolan plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2018. Future value factors are as follows:

Question

Quizplus · Accepted Answer

To calculate the value of the fund at the end of June 30, 2022, we need to find the future value of the four deposits made on July 1, 2018, 2019, 2020, and 2021. Using the future value factor table, we can find the future value of a single deposit of £2,000,000 (the amount of each deposit since £8,000,000/4 = £2,000,000) at the end of four years at an interest rate of 10% compounded annually.

Using the table, the future value factor for 4 years at 10% is 1.4641. Multiplying this factor by the amount of each deposit (£2,000,000) gives us a future value of £2,928,200 per deposit. Multiplying this value by four (to account for all four deposits) gives us a total future value of £11,712,800. Therefore, the best choice is B (£1,565,558), which is the closest answer to the calculated future value of £11,712,800.