Scribd
Upload
30 views2 pages

PDF

Uploaded by

Owene Miles Aguinaldo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
30 views2 pages

PDF

Uploaded by

Owene Miles Aguinaldo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

Glasgow 1

7.13
A machine costs $40,000 to purchase and $10,000 per year to operate. The machine has
no salvage value and a ten-year life. Given i% per year, compounded annually, what is
the equivalent uniform annual cost of the machine?

(see Example 7.8)


The EUAC = Purchase Price (A/P, i%,n) + annual operating costs
= 40000 (A/P, i%, 10) + 10000
(a) 5% = 40000 (A/P, i%, 10) + 10000 = 40000 (0.12950) + 10000 = 15180
(b) 15% ​= 40000 (0.19925) + 10000 = 17970
(c) 20% ​= 40000 (0.23852) + 10000 = 19540.80
(d) Comment on the results ​The EUAC increases with interest rate i.

7.15
A used machine costs $20,000 to purchase. It has an annual maintenance cost of
$20,000, a salvage value of $5000, and a 10-year life. If the interest rate is 10% per year
compounded annually, what is the present-worth cost of the machine?

PW = -P+SV(P/F, i%, n)
= -20000 + 5000 (P/F, 10%, 10) - 20000(P/A, 10%, 10)
= -20000 + 5000/ (2.5937) - 20000/ (0.16275)
= -140960.12, so present worth cost is $140,960.12

7.17
Use (7.2) to determine the future worth of the cash flows in problem 7.6, for i=8% per
year, compounded annually.
(7.2) Future Worth = CF​0​(F/P, i%,n) + CF​1​(F/P, i%,n-1) + CF​2​(F/P, i%,n-2)+ … + CF​n-1​(F/P, i%,1) +CF​n

End of Year 0 1 2 3 4

Cash Flow, 1000 -10 2 2 6 6

FW = -10000 (F/P, 8%, 4) + 2000 (F/P, 8%, 3 ) + 2000 (F/P, 8%,2) + 6000 (F/P, 8%, 1 ) + 6000
= -10000 (1.3605) + 2000 (1.2597 ) + 2000 (1.1664) + 6000 (1.0800) + 6000
= 3727.20

7.19 Compute the future worth cost of the machine in Problem 7.15
FW = PW (F/P, i%,n)
= -140960.12 (F/P,10%,10)
= -140960.12 (2.5937) = a FW cost of $365,608.26
Glasgow 2

7.21 Compute the capital recovery for the machine of 7.15 and compare with the answer
to problem 7.20
A used machine costs $20,000 to purchase. It has an annual maintenance cost of $20,000, a salvage value of $5000, and a 10-year
life. If the interest rate is 10% per year compounded annually, what is the present-worth cost of the machine?

CR does not consider operating or maintenance expenses, as does EUAS/EUAC (p. 60): CR represents
the difference between the annualized costs and the annualized salvage value of the asset, so

CR = (P - SV) (A/P, i%,n) + i (SV)


​ = 15000 (A/P, 10%,10) + (0.10)5000
= 15000 (0.16275) + 500
​= $2941.25 ​$20,000 less than the answer to 7.20

7.23
Calculate the present worth of the cash flows, when i = 10% per year, compounded
annually.

End of Year 0 1 2 3 4

Cash Flow, -10 4 4 4 4


$1000

PW = -10000 + 4000 (P/A,10%,4)


= -10000 + 4000/ (0.31547)
= 2679.49

7.25
A machine which costs $100,000 when new has a lifetime of 15 years and a salvage value
equal to 20% of its original cost. Determine the capital recovery per year for this machine
if the interest rate is 10% per year, compounded annually.

​CR = (P - SV) (A/P, i%,n) + i (SV)


​ = (0.8)100000 (A/P, 10%,15) + (0.10) 20000
= 80000 (0.13147) + 2000
= $12517.60

You might also like