Fight Finance

Courses  Tags  Random  All  Recent  Scores

Scores
keithphw$6,001.61
Jade$1,795.80
Yuan$1,726.43
Zin$1,629.43
zy$1,619.70
Carolll$1,522.43
Visitor$1,473.33
Visitor$1,428.33
Visitor$1,395.80
Visitor$1,363.33
Visitor$1,308.61
Emma Lu$1,300.00
cuiting1$1,300.00
cuiting$1,299.70
Visitor$1,251.28
Visitor$1,073.33
mm11$1,050.33
Nisrita$1,050.33
Tijo$1,043.33
ninalee$1,039.70
 

Question 280  equivalent annual cash flow

You own a nice suit which you wear once per week on nights out. You bought it one year ago for $600. In your experience, suits used once per week last for 6 years. So you expect yours to last for another 5 years.

Your younger brother said that retro is back in style so he wants to wants to borrow your suit once a week when he goes out. With the increased use, your suit will only last for another 4 years rather than 5.

What is the present value of the cost of letting your brother use your current suit for the next 4 years?

Assume: that bank interest rates are 10% pa, given as an effective annual rate; you will buy a new suit when your current one wears out and your brother will not use the new one; your brother will only use your current suit so he will only use it for the next four years; and the price of a new suit never changes.




Copyright © 2014 Keith Woodward