Jenkins Security has learned that a rival has offered to supply a car park with security for 10 years for $50 000 up-front and a further $20 000 per year. If Jenkins Security offers to provide security for eight years for an up-front cost of $70 000 and a separate annual payment, what is the maximum that this annual payment can be so that Jenkins' offer matches the equivalent annual annuity of their rival's offer? (Assume a cost of capital of 6%.)
A)$15 521
B)$13 458
C)$13 995
D)$13 095

Question

Quizplus · Accepted Answer

The Answer of Jenkins Security has learned that a rival has offered to supply a car park with security for 10 years for $50 000 up-front and a further $20 000 per year. If Jenkins Security offers to provide security for eight years for an up-front cost of $70 000 and a separate annual payment, what is the maximum that this annual payment can be so that Jenkins' offer matches the equivalent annual annuity of their rival's offer? (Assume a cost of capital of 6%.)
A)$15 521
B)$13 458
C)$13 995
D)$13 095

Jenkins Security Has Learned That a Rival Has Offered to Supply