Improvised explosive devices (IEDs) are responsible for many deaths in times of strife and war. Unmanned ground vehicles (robots) can be used to disarm the IEDs and perform other tasks as well. If the robots cost $140,000 each and the Military Arms Unit signs a contract to purchase 4000 of them now and another 6000 one year from now, what is the equivalent annual cost of the contract over a 4year period at 10% per year interest?

Question

What will be an ideal response?

Answer 1

P = 140,000(4000) + 140,000(6000)(P/F,10%,1)
= 560,000,000 + 840,000,000(0.9091)
= $1,323,644,000
A = 1,323,644,000(A/P,10%,4)
= 1,323,644,000(0.31547)
= $417,569,973