Cousin Clara has been doing some additional research on the funding for the “You Go Girl Foundation”. Due to the election results she feels it is likely that there will be budget cuts that will affect future grant funding. She still plans to begin operations four years from today (it is still January 1), and she still has an operating budget of $25,000 per year. Due to the budget cuts, she will have to fund operations for eight years before some grants become available. And after the first eight years, she will have to provide $10,000 per year for four more years until total grant funding is possible. All operating funds must be available on the first day of each year.
Clara will still work full time at her job with the credit company to raise the funds necessary for the first twelve years of operations. After the project begins, she will only work enough to pay for her own living expenses, so she must save enough during the next four years to cover the twelve years of operating expenses. Due to the need for additional capital, she will make a deposit today of $50,000 and equal-sized deposits at the end of each of the next four years.
The account at the First Philanthropy Bank will pay 5% interest annually. All monies for the foundation will be deposited in this account. How much must Clara deposit at the end of each of the next four years so that there will be sufficient funds available to finance the foundation’s operating budget for following twelve years?