Answer to Question #47354 in Finance for Nate

Question

John buys a video game for $300. After using it for 2 years, he expects to sell it for
$20. If i = 10%, the annual worth in dollars is
Answer
a. 20 (F/P, 10%, 2) - 300(A/P, 10%, 2)
b. 280 + 10% of 300.
c. 20 (F/A, 10%, 2) - 300(P/A, 10%, 2)
d. 300(P/A, 10%, 2) - 20 (F/A, 10%, 2)

Answer 1

P = $300, t = 2 years, F = $20, i = 10%
Equivalent annual worth = equivalent annual benefit - equivalent annual cost
So, the annual worth in dollars is EAW = 20 (F/P, 10%, 2) - 300(A/P, 10%, 2)
That's why the right answer is a.