Question

A college student has been looking for a new tires. The student feels that the warranty period is a good estimate of the tire life and that 10% interest rate is appropriate. Given 4 options find the minimum Equivalent Uniform Monthly Cost. (Note: the student wants to buy 4 tires)

Warranty time (months) | Tire price (all 4 tires)
12 | 31
24 | 51
36 | 69
48 | 94

Answer 1

The minimum Equivalent Uniform Monthly Cost = $2.2264

Step-by-step explanation:

To find the Equivalent Uniform Monthly Cost: EUAC = P(A/P,I,N)

Where i = 10% => 10% / 12 =

N = 12 , 24 , 36 & 48 months

12 months Warranty time = 31(A/P,10%/12,12)

12 months Warranty time = 31 * 0.0879

12 months Warranty time = $2.7254

24 months Warranty time =51(A/P,10%/12,24)

24 months Warranty time = 51 * 0.0461

24 months Warranty time = $2.3534

36 months Warranty time = 69(A/P,10%/12,36)

36 months Warranty time = 69 * 0.0323

36 months Warranty time = $2.2264

48 months Warranty time =94(A/P,10%/12,48)

48 months Warranty time = 94 * 0.0254

48 months Warranty time = $2.3841