How much must the firm deposit into the fund each year in


The Nucleo-Robotics Corporation has just issued $10,000,000 of first mortgage bonds, each having a par value of $1,000 and a coupon interest rate of 15 percent. The bonds have a 25-year maturity and require that the firm establish a sinking fund sufficient to retire 80 percent of the bonds by the time the bonds are scheduled to mature. The first deposit into the sinking fund will occur at the end of year 6. The firm will make 20 end-of-year deposits. Money deposited into the sinking fund is expected to earn a 12 percent rate of return over the 20-year life of the fund. How much must the firm deposit into the fund each year in order to meet its sinking fund obligations?

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Financial Management: How much must the firm deposit into the fund each year in
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