Part a) The maintenance on a machine is expected to be $155 at the end of the fi

Question

Part a) The maintenance on a machine is expected to be $155 at the end of the first year, then increasing by $35 each year for the next 7 years. What sum of money would need to be set aside now to pay the maintenance for the 8-year period? Assume 10% interest. b) What is the uniform annual equivalent maintenance cost for the above machine? Compute an equivalent A for the maintenance costs. in individual is considering the purchase of a used automobile. The total price is $6200 with 1240 as a down payment and the balance to be paid in 48 equal monthly payments with interest Part 2 12% compounded monthly. onthly payment. f The payments are due at the end of each month. Compute the

Explanation / Answer

Part 1:

a) Here, Maintenance cost of first year (A1) = $155

               Gradiant amount (G) = $35

Uniform Annual equivalent maintenance cost (A) = A1 + G(A/G, i, n)

                                                                              = 155 + 35(A/G, 10%, 8)

                                                                              = 155 + 35(3.0045)

                                                                              = $260.16

PW = 260.16(P/A, 10%, 8)

      = 260.16(5.3349)

      = $1387.93

Thus, $1387.93 need to be set aside now.

b)

Uniform Annual equivalent maintenance cost (A) = A1 + G(A/G, i, n)

                                                                              = 155 + 35(A/G, 10%, 8)

                                                                              = 155 + 35(3.0045)

                                                                              = $260.16

Part 2:

Loan amount (P) = 6200 - 1240 = $4960

n = 48

i = 12% / 12 = 1%

A = 4960(A/P, 1%, 48)

   = 4960 (0.0263)

   = $130.45

Thus, the monthly payment is $130.45

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