Question

A textile mill has just purchased a lift truck that has a useful life of 5 years. The engineer estimates that the maintenance costs for the truck during the first year will be $1000. As the truck ages, the maintenance costs are expected to increase at a rate of $250 per year over the remaining life. The firm wants to set up a maintenance account that earns 12% annual interest. All future maintenance expenses will be paid out of this account. How much does the firm have to deposit in the account now?

Answer 1

just purchased a lift truck that has a useful life of 5 years. The engineer estimates that the maintenance costs for the truck during the first year will be $1000. As the truck ages, the maintenance costs are expected to increase at a rate of $250 per year over the remaining life. The firm wants to set up a maintenance account that earns 12% annual interest. All future maintenance expenses will be paid out