Your Human Resource Department has come to you and needs your help to solve the problem of an employee, Mr. Johan.

Mr. Johan intends to retire in 20 years at the age of 60. As yet, he has not provided for retirement income, and he wants to set up a periodic savings plan to do this He planned to make equal annual payments into a savings account that pays 5 percent interest per year.

Required:

As someone with background of accounting for decision making, advise Mr. Johan how large must his payments be to ensure that after retirement he will be able to draw $36,000 per year from this account until he is 75.