Question

You want to buy a car with estimated maintenance costs shown in the table below. Assuming...

  1. 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

0 0
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Answer #1

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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