Reference no: EM133066141

Show all work. The answer must include PAINFGP = Present value (this value is not used in this problem) and the cash flow diagrams.

A = Annuity; this is the value that is given in this problem

i = Effective interest raten = Number of payments

F = Future value; this is the value that we want to find in this problem (F = ?)G = Gradient value (this value is not used in this problem)

1. You are looking into buying an extended vehicle warranty on your car because someone suggested it was a good idea.  Your vehicle is 5 years old with 50,000 mi.  The maintenance cost is $2500 per year.  It is expected to increase by $500 per year until year 12 when you donate the car to raise money for the Blind.  Assume normal mileage.  If the extended warranty cost covers all mechanical costs after a deduct of $1000/event. The annual extended warranty is $1500/year and you have 2 repairs per year.  IS this a good deal.  (hints - bring both the maintenance costs and the costs for the warranty, including deducting to the present.  Note you are looking a the purchase when the vehicle is already 5 years old.) Assume the interest rate to consider is 4%