In: Finance
The Great Giant Corp. has a management contract with its newly hired president. The contract requires a lump sum payment of $25 million be paid to the president upon the completion of her first ten years of service. The company wants to set aside an equal amount of funds each year to cover this anticipated cash outflow. The company can earn 6.5% on these funds. How much must the company set aside each year Please walk me through the steps using a finance calculator
On financial Calculator
R = 0.065
Nper = 10 years
pv = ?
fv = 25,000,000
PMT = 1,852,640.94
Without Financial Calculator
Future Value Annuity =
r = 0.065
n = 10
25,000,000 =
25,000,000 = Periodic Payment * 13.4944225421
Periodic Payment = 25,000,000 / 13.4944225421
Periodic Payment = 1,852,640.94