What makes the problem tricky is that the amount of

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ay First maintenance payment of $1590 Interest rate =5% Final maintenance payment (end of time in house) In this question, we are trying to find the PRESENT VALUE of the total maintenance payments that Christine is making over the next 10 years. What makes the problem tricky is that the amount of the maintenance payment grows each year. So we have to use multiple steps to solve the problem. The first step is to forecast the maintenance payments in EACH of the next ten years, using the given growth rate of 6%. You should have ten separate numbers, each one 6% greater than the previous year’s figure. For the second step, you can choose to go in 1 of 2 directions. Option 1 is to find the future value in year 10 of each of these maintenance payments. You can use the excel...
View Full Document

Ask a homework question - tutors are online