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An equipment leasing company leases earthmovers (rubber-tired scrapers) at a monthly rate. Drive wheel tires...

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Finance

An equipment leasing company leases earthmovers (rubber-tired scrapers) at a monthly rate. Drive wheel tires for the scraper last about six months and cost about $12,000 a pair. The company buys tires at EOM 0 and each six months thereafter for the 10-year life of the scraper (no expenditure at EOM 120).

How much in terms of dollars per month should the leasing company charge just to cover the cost of the tires if they borrow and lend at 1.5 percent per month? The first payment is received at EOM 1, and the last at EOM 120.

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