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Item 4

Item 4 10 points

A software company that installs systems for inventory control using RFID technology spent $660,000 per year for the past 3 years in developing their latest product. The company optimistically hopes to recover its investment in 5 years on a single contract beginning immediately (year 0). The company is negotiating a contract that will pay $295,000 now and a to-be-agreed-upon annual increase of a constant amount each year through year 5. How much must the income increase (an arithmetic gradient) each year if the company wants to realize a return of 12% per year?