Question: How much will your corporation have accumulated in a trust funds account for its retired employees at the end of 20 years from now, if it deposits $20,000 at the beginning of the first year, and $5,000 at the end of each year thereafter, with the last deposit made at the end of the 20th year? Assume the firm can earn a sure 6% annual interest rate (return) on the deposited money.
1) Show a complete timeline of the cash flows. Please, interpret the deposit of the $5,000 as occuring at the end of each of the other year thereafter -- that is beginning at the end of year 2, as discussed in class.
2) Calculate the Future Value of all of the cash flows at the end of year 20.
3) Use the long method (yes, this is tedious!!) by finding the FV of each cash flow to T=20, individually and then add together all the calculated future values.
4) Then, use TVM shortcut formulas to verify your result in 3).