Show all work.

The answer must include PAINFG and the cash flow diagrams.

P= Present value (this value is not used in this problem) A = Annuity; this is the value that is given in this problem i = Effective interest rate n = Number of payments F = Future value; this is the value that we want to find in this problem (F= ?) G = Gradient value (this value is not used in this problem)

1. You are looking into buying an extended vehicle warranty on your car because someone suggested it was a good idea. Your vehicle is 5 years old with 50,000 mi. The maintenance cost is $2500 per year. It is expected to increase by $500 per year until year 12 when you donate the car to raise money for the Blind. Assume normal mileage. If the extended warranty cost covers all mechanical costs after a deduct of $1000/event.The annual extended warranty is $1500/year and you have 2 repairs per year. IS this a good deal. (hints - bring both the maintenance costs and the costs for the warranty, including deducting to the present. Note you are looking a the purchase when the vehicle is already 5 years old.) Assume the interest rate to consider is 4%