Answer:
The answer is $59,948.7
Explanation:
Solution
Given that:
The Cost of medical equipment = $350,000
The Salvage value = 10% of cost of medical equipment = 0.10 * $350,000 = $35,000
Now,
The Useful life = 10 years
Thus,
It has been stated that investment with risk similar earn is a 12% rate of return.
Hence, the average opportunity cost per year is equal to the equal cost annual of this medical equipment.
So
We Calculate the equivalent annual cost -
Which is
EAC = Cost of medical equipment(A/P, i, n) - salvage value(A/F, i, n)
EAC = 350,000(A/P, 12%, 10) - [35,000(A/F, 12%, 10)]
EAC = [350,000 * 0.17698] - [35,000 * 0.05698]
EAC = 61,943 - 1994.3
EAC = 59,948.7
Therefore, the opportunity cost average per year is $59,948.7
