a badger diggers leased a new trencher . they pay a$10,000 deposit now, $5000 in

ID: 1222448 • Letter: A

Question

a badger diggers leased a new trencher . they pay a$10,000 deposit now, $5000 in year 1 . with lease costs increasing $1000 each year through year 6. what is the total value of there payments at the end of year 6? use an interest rate of 8% per year.

B badger now wants to buy the trencher for $90,000. how much more do they pay

complete the table below on excel

present value= ?

future value = ?

how much more do they pay? (subject is engineering economy)

year total costs 0 $10,000 1 2 3 4 5 6

Explanation / Answer

year

total costs

$10,000

5000

6000

7000

8000

9000

10000

As per the details furnished in the questions, above deposits are made.

R = 8%

Present value of all these payments = 10000 + 5000/(1+R) + 6000/(1+R)^2 + 7000/(1+R)^3 +8000/(1+R)^4 + 9000/(1+R)^5 +10000/(1+R)^6

Present value of all these payments = 10000 + 5000/(1+8%) + 6000/(1+8%)^2 + 7000/(1+8%)^3 +8000/(1+8%)^4 + 9000/(1+8%)^5 +10000/(1+8%)^6

Present value of all these payments = $43637.67

Future value of all these payment= 10000*1.08^6 + 5000*1.08^5 + 6000*1.08^4 + 7000*1.08^3 + 8000*1.08^2 + 9000*1.08 + 10000

Future value of all these payment = $69247.5

Additional payments to be made = 90000 - 69247.5 = $20752.5