+20 The Great Giant Corp. has a management contract with its newly hired president. The contract requires a lump sum payment of $24,300,000 be paid to the president upon the completion of her first 8 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 7 percent on these funds. How much must the company set aside each year for this purpose?
The company must set aside an amount of $2,368,466.63 per year for 8 consecutive years @ 7% interest compounded annually. The formula you would use for this is this:
FV=P{[1 + R]^N - 1/ R}=FV OF $1 PER PERIOD. Where R=Interest rate per period, N=number of periods, P=periodic payment, FV=Future value.
