29. In problem 17 above, Sarah Truman is concerned that 8% might not be the correct interest rate to use. Sarah would like to know what the rate of interest would have to be to make the two suits of equivalent present value. Sarah plans to make 50 cold water divers per year for the next 6 years.

Problem 17.

15. Sarah Truman is an avid scuba diver who lives in Maine. Since New England waters are very cold, Sarah has decided to purchase a dry suit for diving. After some investigation, Sarah must decide which one of the two suits to buy a Denmark suit for $750 or a Washington suit for $300. The major difference between the two is that the Denmark should last for 300 dives whereas the Washington suit will need to be replaced after 100 dives. Sarah has $750 in a savings account paying 8% interest, which can be used to pay for either suit. Which suit would be the most economical for Sarah to buy? Analyze Sarahs problem for each of the following assumptions:

    1. Sarah expects to make 25 cold water divers per year for the next 12 years.

    2. Sarah expects to make 50 cold water divers per year for the next 6 years.