Step 1: Calculating the Total Price Including VAT
Firstly, we need to determine the total price of the TV after VAT has been added. VAT, or Value Added Tax, is a type of sales tax that is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. It’s essentially a tax on the value added to the product or service at each stage.
In this case, the VAT is 20% of the price of the TV. Therefore, we calculate the VAT by multiplying the price of the TV (£1600) by the VAT rate (20%).
VAT = £1600 * 20% = £320
Then, to get the total price of the TV after adding VAT, we add the original price of the TV to the VAT.
Total Price = Price of TV + VAT Total Price = £1600 + £320 = £1920
Step 2: Calculating the Balance After Deposit
Next, we need to find out how much money Paul still owes after paying his deposit. To do this, we subtract the deposit (£500) from the total price of the TV after VAT (£1920).
Balance After Deposit = Total Price – Deposit Balance After Deposit = £1920 – £500 = £1420
Step 3: Calculating the Monthly Payment
Finally, we can calculate the monthly payment by dividing the balance after deposit by the number of months (10) that Paul will be making payments.
Monthly Payment = Balance After Deposit / Number of Months Monthly Payment = £1420 / 10 = £142
So, each monthly payment that Paul will have to make is £142.
This problem involves understanding of basic arithmetic operations, as well as the concept of VAT and how it is calculated and applied to the price of goods and services. It also illustrates how a large payment can be broken down into smaller, more manageable monthly payments.