What is the present worth of the contract

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Reference no: EM131003361

A small manufacturing company is considering purchasing a maintenance contract for its air conditioning systems. Since all of its systems are new, the company plans to begin the contract in year four and continue through year ten. The cost of the contract is $3,200 per year and the company's minimum attractive rate of return is 12% per year.

1. What is the present worth of the contract?

2. If the company wishes to pre-pay the contract with uniform payments in years one, two and three only, what will be the amount of each payment?

3. What is the equivalent uniform annual amount of the contract in year one through ten?

Reference no: EM131003361

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