Question

14) The maintenance cost for a car this year is expected to be $600. The cost will increase $50 each year for the subsequent 9 years. The interest is 8% compounded annually. The present worth of maintenance for the car over the full 10 years is nearest to: a) $4,700 b) $5,100 c) $5,300 d) $5,500

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Answer #1

P = A(P/A, 8%, 10) + G(P/G, 8%, 10)
= ($600)(6.7101) + ($50)(25.9768) = $5325

The both uniform gradient and the uniform series factors are evaluated for 10 years and the present worth of maintenance for the car over the full 10 years is nearest to $5300.

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