A company that manufactures air-operated drain valve assemblies currently has $85,000 available to pay for plastic components over a 5-year period. If the company spent only $42,000 in year 1, what uniform annual amount can the company spend in each of the next 4 years to deplete the entire budget? Let i = 10% per year.
What will be an ideal response?
Move $85,000 to year 1, subtract $42,000, and find the equivalent over 4 remaining years.
A = [85,000(F/P,10%,1) - 42,000](A/P,10%,4)
= [85,000(1.1000) - 42,000](0.31547)
= $16,247
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