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What is the equivalent present worth of maintenance

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Question: RDA manufactures jet planes. Maintenance of their planes costs $8,000 per year. If interest is 5% per year, what is the equivalent present worth of ten years of maintenance?

For the problem above, RDA can obtain a ten-year maintenance agreement for $55,000 paid now. The agreement would cover all maintenance costs for the next ten years. Should they purchase the agreement?

Reference no: EM132720460

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