The construction of a new bakery requires the property development firm to pay the municipality the cost to expand its sewage treatment plant. In addition to the expansion costs, the developer must pay $60,000 annually toward the plant operating costs.  The developer plans to finance the annual costs by placing money into a fund that earns 5% per year to pay its share of the plant operating costs forever. The amount to be paid to the fund is most nearly:  

Solution:  The present worth of an infinite (perpetual) series of annual amounts is found below and is known as capitalized cost.  

P = A ÷ i = 60,000 ÷ .05 = $1,200,000