If the operators
of the golf course revised their revenue estimates so that each cart is
expected to earn $100 less, how many carts would they buy at an interest
rate of 8 percent? How many would they buy if the interest rate is 3 percent?
Like some of your earlier posts, some critical information is missing. What is the price of a cart? and what is the useful life (in years) of a cart?
This is how the question is asked..., no other info given.
To answer this question, we need to consider the present value of the expected revenue from each cart and calculate how many carts would be feasible to purchase at different interest rates.
1. Determine the Present Value (PV) of the expected revenue:
The formula to calculate the present value is given by:
PV = FV / (1 + r)^n
where PV is the present value, FV is the future value or expected revenue, r is the interest rate, and n is the time period.
2. Calculate the number of carts they can buy at an interest rate of 8 percent:
Let's assume the original expected revenue per cart is X. So, the revised expected revenue per cart would be (X - $100).
Now we can proceed with the calculation:
PV = (X - $100) / (1 + 0.08)^n
PV = X / 1.08^n
Let's assume they can purchase Y carts.
Therefore, Y * PV = Total funds available for the purchase.
3. Calculate the number of carts they can buy at an interest rate of 3 percent:
Using the same logic, the calculation would be as follows:
PV = (X - $100) / (1 + 0.03)^n
PV = X / 1.03^n
Let's assume they can purchase Z carts.
Therefore, Z * PV = Total funds available for the purchase.
Remember that the "X" value would be determined based on additional information provided about the revenue per cart. Substitute the given values into the formulas to calculate the number of carts they can buy at different interest rates.