Question

The operating cost for a pulverized coal cyclone furnace is expected to be $80,000 per year. The steam produced will be needed for only 6 years beginning now (i.e., years 0 through 5). What is the equivalent annual worth in years 1 through 5 of the operating cost at an interest rate of 10% per year

Answer 1

Answer:

$101,104

Explanation:

Calculation for the equivalent annual worth

Using this formula

Equivalent annual worth=Operating cost(A/P,i,n)+ Operating cost

Let plug in the formula

Equivalent annual worth=80,000(A/P,10%,5) + 80,000

Using financial calculator (A/P,10%,5) will give us (0.26380)

Hence,

Equivalent annual worth=80,000(0.26380) + 80,000

Equivalent annual worth=$21,104+$80,000

Equivalent annual worth== $101,104

Therefore the Equivalent annual worth will be $101,104