Question

3. The company you intern for uses a laser printer and has a choice between two different types of toner cartridges. Type A (regular) lasts 6,000 pages and costs $59.99 while type B (high capacity) lasts 9,000 and costs $99.99. The company prints about 3,000 pages per month. Use present worth analysis to decide which type the company should buy if it uses an interest rate of 12% (monthly compounding)? [2 points]

Answer 1

there are two option of cartriges options available here

Option 1

6000 pages at cost $ 59.99 with compounding interest @ 12% ( monthly compounding)

here per month cost = {principal (1+ interest rate / 100)2 month} / 2 months

= {59.99 (1+12%/100)2} / 2 months

per month cost = $ 37.63

Option 2

9000 pages at cost $ 99.99 with compounding interest @ 12% ( monthly compounding)

here per month cost = {principal (1+ interest rate / 100)3 month} / 3 months

= {99.99 (1+12%/100)3} / 3 months

per month cost = $ 46.83

here per month cost of cartrige is less in option 1 , therefore it is better than option 2

Note - here months finds on the basis of pages print per month like 9000 pages/ 3000 pages per month = 3 months