Your little brother is starting a lawn mowing business but does not have enough money to buy his own lawnmower so he wants to buy yours on a payment plan. He will give you $50 now, plus $20 at the end of the month for the next 6 months plus an additional $75 at the end of the 6 months if he can keep the mower. What is the present value of the offer he is making for your mower using a nominal interest rate of 18% compounded monthly?
Draw the combined cash flow diagram including the unknown value.
Draw the individual cash flow diagrams for the $50 initial, $20 monthly, and $75 final payments.
What are the values of the following? If it is the answer we are looking for write “ans” if not applicable write “n/a” Hint: see second sheet of formulas from inside cover.
$50 initial: Type ____/_____P = _______, F = _______, A = _______, r = ________, i = _________, n = _______ $20 monthly: Type ____/_____P = _______, F = _______, A = _______, r = ________, i = _________, n = _______ $75 final: Type ____/_____P = _______, F = _______, A = ________, r = ________, i = ________, n = _______
Solve using the tables from Appendix C. At a minimum show the value obtained from the table and the calculation you perform using that value.
Solve using calculation and the formulas from the book. At a minimum show the formula, then the formula with values, and your calculation.