A used piece of rental equipment has 2 1/ 2 years of useful life remaining. When

Question

A used piece of rental equipment has 2 1/ 2 years of useful life remaining. When rented, the equipment brings in $700 per month (paid at the beginning of the month). If the equipment is sold now and money is worth 4.3%, compounded monthly, what must the selling price be to recoup the income that the rental company loses by selling the equipment "early"? (a) Decide whether the problem relates to an ordinary annuity or an annuity due. (b) Solve the problem. (Round your answer to the nearest cent.)

Explanation / Answer

if the piece rented then we get = ($700 x 18 months)

                                             = $12,600

if we want to sold then, we require sp to get our money as per in rent, so

                12,600 = sp(1+(4.3/100))18     :- compound intrest formula

so, 12600= (sp x 2.133622 ) ,when we do this simple math we get something like

                                sp = $5905.45

so, we sold the piece to the cost of $5905.45 to get as like in rental money we get.

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