1. 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 $10,000, so that Jenkins' offer matches the equivalent annual annuity of their rival's offer? (Assume a cost of capital of 5%.)
1. 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 $10,000, so that Jenkins' offer matches the equivalent annual annuity of their rival's offer? (Assume a cost of capital of 5%.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please do it by hand. I can't really understand excel explanations. Thank you.
Transcribed Image Text:1. 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 $10,000, so that
Jenkins' offer matches the equivalent annual annuity of their rival's offer? (Assume a cost of
capital of 5%.)
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