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February 26, 2010Cool Copy leases office equipment with an original price of $12,000 for $400 per month. The lease also has an option to buy. Fifty percent of the monthly lease price can be applied to the purchase price, up to 30% of the original sale price. If the company commits to purchase the equipment is less than 2 years, the original price will be reduced by 10% How much will the company owe on the equipment if they buy it after 15 months?
A. $7,800
B. $10,800
C. $4,200
D.OTHER
Please give the correct answer and explain. Enjoy your 10 points! Thanks
The answer is A.
The original purchase price is now $10,800. (after 10% reduction)
$400 x 15 = $6,000, 50% = $3,000 of payments may be applied to purchase.
.30 x $10,800 = $3,240, so the applied payments are under this cap.
The answer is 10,800 - 3000 = $7,800.
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Horaayy..there are 3 comment(s) for me so far ;)
The answer is A.
The original purchase price is now $10,800. (after 10% reduction)
$400 x 15 = $6,000, 50% = $3,000 of payments may be applied to purchase.
.30 x $10,800 = $3,240, so the applied payments are under this cap.
The answer is 10,800 - 3000 = $7,800.
References :
Maximum amount that can be paid off is 30% x $12,000 = $3,600
Amount potentially paid off is 15mths * $200/month = $3,000.
This is less than the $3,600 so can be subtracted from the purchase price.
It’s not clear if the company committed to buy the equipment, so it’s not clear whether the 10% discount should be applied.
If you apply it, then the cost is $12,000*(1-10%) -$3,000 = $7,800
If no, then the cost is $12,000-$3,000 = $9,000
I guess they committed to buy!
References :
Unpaid 30% portion of the machine’s discounted price:
= 0.3($12,000[1 - 01]) - 0.5($400 * 15)
= 0.3($12,000[0.9]) - 0.5($6,000)
= 0.3($10,800) - $3,000
= $3,240 - $3,000
= $240
Amount the company owes after 15 months:
= 0.7($10,800) + $240
= $7,560 + $240
= $7,800
Answer: A. $7,800
References :