Engineering Board Exam Reviewer · Equivalent Uniform Annual Cost · hard
A lease requires payments of P180,000 at the beginning of each year for 10 years. At 10% interest, what equal end-of-year payments for 10 years are equivalent to this lease?
- P180,000
- P163,636.36
- P162,000
- P198,000
Answer
D. P198,000
Solution
A payment made at the beginning of a year is worth (1+i) times as much at the end of that year. So the equivalent end-of-year payment is 180,000(1.10)=P198,000.
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