On January 15, 2012, Dolan Corp.adopted a plan to accumulate funds for environmental improvements beginning July 1, 2016, at an estimated cost of $4,000,000.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, 2012.Future value factors are as follows: Dolan should make four annual deposits of

Question

On January 15, 2012, Dolan Corp.adopted a plan to accumulate funds for environmental improvements beginning July 1, 2016, at an estimated cost of $4,000,000.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, 2012.Future value factors are as follows:  Dolan should make four annual deposits of

Quizplus · Accepted Answer

Using future value of an annuity formula:
FV = PMT x [(1 + r)^n - 1] / r

Where:
PMT = Payment (annuity)
r = Interest rate per compounding period
n = Number of compounding periods

Filling in the values:
FV = $4,000,000
PMT = ?
r = 10% compounded annually = 10%
n = 4

$4,000,000 = PMT x [(1 + 0.10)^4 - 1] / 0.10
$4,000,000 = PMT x 3.16986
PMT = $1,262,191.92 / 4
PMT = $315,547.98

Therefore, Dolan should make four annual deposits of $862,069 (rounded to the nearest dollar) to accumulate $4,000,000 by July 1, 2016, at an interest rate of 10% compounded annually.