Question

The owner of a cemetery plans to offer a perpetual care service for grave sites. The owner estimates that it will cost $120 per year to maintain a grave site. If the interest rate is 8 percent, what one-time fee should the owner charge for the perpetual care service

Answer 1

Answer:

One-time fee is $1,500

Explanation:

The perpetual care service is an annuity to the owner

and the one-time fee is a present value therefore to calculate it we will use Present value Annuity fomula

PV = c/r

    = $120/0.08

    = $1,500