Question

A printer costs $900. Its salvage value after 5 years is $300. Annual maintenance is $50. If the interest rate is 8%, the equivalent uniform annual cost is

Answer 1

Answer:

equivalent annual cost = $224.27

Explanation:

given data

printer costs = $900

salvage value = $300

time = 5 year

Annual maintenance = $50

interest rate = 8%

solution

we get here uniform annual cost that is

equivalent annual cost = net present value ÷ [ 1 - $\frac{ ( 1+r)^{-t} }{r}$ ] + annual maintenance cost ..................1

here net present value =900-300 ×  $\frac{1}{(1+0.08)^5}$ = $408.35

put here value

equivalent annual cost = $\frac{408.35}{\frac{1-(1+0.08)^{-5}}{0.08} } + 50$

equivalent annual cost = $224.27