You want to buy a car with estimated maintenance costs shown in the table below. Assuming...
- You want to buy a car with estimated maintenance costs shown in the table below. Assuming you can get 6 % interest on your money (hah!), how much money should you put in the bank NOW to provide for those maintenance costs? Show any associated cash-flow diagrams.
|
Year |
Cost of Maintenance |
|
1 |
$150 |
|
2 |
$190 |
|
3 |
$230 |
|
4 |
$270 |
|
5 |
$310 |
Homework Answers
To calculate how much money we need to put in the bank now, to provide for the maintenance cost, we have to calculate the present value these cash flows.
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