Annuity due in a sinking fund

[leonicity]

Hi.

I just don't get how to do annuity due in a sinking fund. I assume I am supposed to throw in a (1+ i) because payments come at the beginning, hence the (due)!! Ok, so here is the question:

"A company wishes to set up a fund to replace equipment which will cost $75,000 five years from now, making equal sized payments at the beginning of each of the next five years. If money is worth 12% annually, what is the size of the monthly payment?"

I have $9,838.11 as an answer, but I'm not really sure.

Also, the following question asks:

"Calculate the interest and increase into the fund described in [the previous question] during the 4th payment period."

To find the answer to this, I just made n=3, using the future value formula. Now, where I'm really confused is in the text book it tells me how to find this annuity due, but it makes no sense and I am hoping someone can clarify for me, please.

Thanks

 

[Denis]

"A company wishes to set up a fund to replace equipment which will cost $75,000 five years from now, making equal sized payments at the beginning of each of the next five years. If money is worth 12% annually, what is the size of the monthly payment?"
I have $9,838.11 as an answer, but I'm not really sure.

9,838.11 is the answer to accumulate $70,000 : NOT $75,000 ; check your problem please...

 

[leonicity]

Sorry, it totally is $70,000. So then in the next question, where it asks what the increase and interest are, my answer is $2,502.82 interest and $12,340.93 increase. Does that sound right?