Solve the problem. (Round your answer to the nearest cent.)

Question

A used piece of rental equipment has 4 years of useful life remaining. When rented, the equipment brings in $300 per month (paid at the beginning of the month). If the equipment is sold now and money is worth 4.3%, compounded monthly, what must the selling price be to recoup the income that the rental company loses by selling the equipment "early"?

Answer 1

Estimated sales price: forfeiting $300 over next 4yrs = about $15k.

Since money now is worth more, could sell for 9pct less [2yr of 4.5 pct/yr midpoint] = $13.5k :)