ACTIVITY C: Annuities and Capitalized Cost

Name: ________________________________ Date: _______________________

Section/Schedule: ______________________ Instructor: ___________________

Evaluate each given.

1. A man bought a Ford Fairlane, Model 1965, for P21,000 on installment basis at the rate
of 12% per annum on the unpaid balance. If he paid a down payment of P6,000 in cash
and proposes to pay the balance in 20 monthly payments, what should these monthly
payments be?

2. A farmer bought a tractor costing P12,000 if paid in cash. The tractor may be purchased
by installment to be paid within 5 years. Money is worth 8% compounded annually.
Determine the amount of each annual payment if all payments are made (a) at the end of
each of the 5 years, and (b) at the beginning of each of the 5 years.

3. A heat exchanger is needed in a chemical process. If interest is 9% compounded annually,

determine which of the following heat exchangers is cheaper by comparing the capitalized
costs:
Exchanger A costs P22,000 with a scrap value of P1,000 and a useful life of 7
years;
Exchanger B costs P28,000 with a scrap value of P1,500 and a useful life of 10
years.

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