Jenkins Security has learned that a rival has offered to supply a parking garage with security for ten years for $45,000 up front and a further $15,000 per year. If Jenkins Security offers to provide security for eight years for an upfront cost of $60,000 and a separate yearly payment, by what maximum amount can this yearly payment be over $20,000, so that Jenkins' offer matches the equivalent annual annuity of their rival's offer? (Assume a cost of capital of 5%.)
A) -$89
B) -$94
C) -$100
D) -$111

Question

Quizplus · Accepted Answer

D) Using a financial calculator,
spreading $45,000 over 10 years = $5827.70587; thus, 11ea84dc_f55c_74b6_9a63_3b612a996098_TB1316_11_TB1316_11 spreading $60,000 over 8 years = $9283.30882; thus, the 11ea84dc_f55c_74b7_9a63_a327e3c2f18f_TB1316_11_TB1316_11

Jenkins Security Has Learned That a Rival Has Offered to Supply