Contemporary Mathematics for Business and Consumers 7th Edition by Robert Brechner ,George Bergeman

Exercise 32

You are the vice president of finance for Neptune Enterprises, Inc., a manufacturer of scuba diving gear. The company is planning a major plant expansion in 5 years. You have decided to start a sinking fund to accumulate the funds necessary for the project. Your company's investments yield 8% compounded quarterly. It is estimated that $2,000,000 in today's dollars will be required; however, the inflation rate on construction costs and plant equipment is expected to average 5% per year for the next 5 years.
a. Use the compound interest concept from Chapter 11 to determine how much will be required for the project, taking inflation into account.
b. What sinking fund payments will be required at the end of every 3-month period to accumulate the necessary funds?