The Great Giant Corp. has a management contract with its newlyhired president. The contract requires...

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

Solutions

Expert Solution

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

jeff jeffy answered 2 years ago

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