Question

Suppose you're currently paying your cell phone subscriber a total of 5150/ month for two cell phones (one for you the other for your daughter). Your subscriber offers you a family plan where you will pay a total of $125/ month and they will upgrade your phones. The new contract. (phones included) will cost $400. If you opt for the new contract, after approximately how many months does it start paying for itself? Fully explain how you arrived at your answer. Divide: difference in initial fee / difference in monthty fees =−= Initially you will be spending more with the new purchase. Every month after the purchase, you will be saving extra money you initially spent. Beyond that you will continue saving every month

Answer 1

By comparing the current plan with the new family plan, it takes approximately 16 months for the new plan to become cost-effective, after accounting for the initial extra cost.

Step-by-step explanation:

The question deals with determining after how many months a new family plan for cell phones becomes more cost-effective compared to the current payment plan. Given the current monthly payment of $150 for two phones and a new family plan offer of $125 per month with an upfront cost of $400 for upgraded phones, we calculate the break-even point as follows:

• Calculate the monthly savings: $150 - $125 = $25 per month.
• Calculate the initial extra cost: $400 (one-time payment for new phones).
• Divide the initial extra cost by the monthly savings: $400 / $25 = 16 months.

Thus, it will take approximately 16 months for the new contract to start paying for itself.