Question

An engineering firm can lease a measurement system for $1,000 per month or purchase one for $15,000. The leased system will have no monthly maintenance cost, but the purchased one will cost $80 per month. At an interest rate of 0.5% per month, how many months must the system be required to breakeven

Answer 1

Answer: 17 months

Explanation:

Lease amount = $1000 per month

Purchase amount = $15000

Interest rate = 0.5% per month

Let the number of months that us required for the system to breakeven be m. Therefore,

m × 1000 = 15000 + ( m × 80) + (m × 15000 × 0.5)/100

1000m = 15000 + 155m

1000m - 155m = 15000

845m = 15000

m = 15000 / 845

m = 17 months