A company estimates that a certain piece of machinery will have to be replaced in five years' time at a cost of R180 000. Equal, monthly payments are deposited into a fund, paying 12% p.a. compounded monthly at the end of each month for 5 years so as to realise the R180 000. The maintenance costs for the current machine are to be drawn from this fund every six months. The first maintenance withdrawal of R2000 is due one year from now and from the second withdrawal onwards, the maintenence cost will increase each half-year at a rate of 5% p.a. The last maintenance cost is due six months before the replacement of the machinery. The value of the monthly deposits ( to the nearest cent) is R type your answer.

A company estimates that a certain piece of machinery will have to be replaced in five years' time at a cost of R180 000. Equal, monthly payments are deposited into a fund, paying 12% p.a. compounded monthly at the end of each month for 5 years so as to realise the R180 000. The maintenance costs for the current machine are to be drawn from this fund every six months. The first maintenance withdrawal of R2000 is due one year from now and from the second withdrawal onwards, the maintenence cost will increase each half-year at a rate of 5% p.a. The last maintenance cost is due six months before the replacement of the machinery. The value of the monthly deposits ( to the nearest cent) is R type your answer.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

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