What monthly cost would be equivalent to the riginal schedul

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Your company bought a machine on January 1, 2011 for $16,000. It was used for two years under a maintenence agreement that called for monthly payments, at the end of each month, of $280. At the end of the two-year period the machine was sold back to the manufacturer for $5,000. The annual interest rate is 6%, compounded monthly.

a) Draw a cash flow diagram of the expenditures related to this machine.

b) What was the equivalent worth of these cash flows on January 1, 2011?

c) What was the equivalent worth of these cash flows on January 1, 2013?

d) If the machine could instead be leased for two years for some monthly payment (paid at the beginning of each month), what monthly cost would be equivalent to the original schedule of payments?

Reference no: EM13156469

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