Expert: Josh - 6/22/2005

Question
Option 1: Equipment can be purchased for one-time cost of $25,000.

Option 2: Equipment can be rented for a flat rate of $12,000 plus $500 per month for 30 months.

Option 3: Equipment can be leased for a flat rate of $5000 plus $1000 per month for 30 months.

Number    Total cost  Total cost  Total cost   
Of Months (option 1)  (option 2)  (option 3)
   0          $25,000    $12,000     $5,000
   1          $25,000    $12,500     $6,000
   2          $25,000    $13,000     $7,000         
Up to 30
months

Write an equation representing the total cost for x months, for each of the three options.

Option 1: Purchase the equipment y=_____________

Option 2: Rent the equipment     y=_____________

Option 3: Lease the equipment    y=_____________

Answer
Alex,

The first option is indepedent of x. Doesn't matter how many months it last for, you pay for the equipment up-front. There is no renting cost involved.

Opt-1: y=25000.

Second one is a straight line equation, with a y-intercept of 12000 (i.e., value of y=12000, when x=0 month).

Opt-2: y=500*x+12000.
Observe that x is our time variable (measure in months), 500 represents the monthly rate and 12000 is the down-payment.

Third case is similar to the second case. It has the same form. All you have to do is to change the values for "500" and "12000". I'll let you figure this out.