Question

A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $57,673, maintenance costs that start at $5,000 at end-of-year (FOY) one and increase by $1,000 for each of the next four years, and then remain constant for the following five years; savings of $23,331 per year (EOY 1-10); and finally a resale value of $29,564 at EOY 10. If the project has a 10-year life and the firm's MARR is 10% per year, what is the present worth of the project?

Answer 1

Useful life of the project = 10 years

R = 10%

Resale value after 10 years = $29564

Present worth of the project = - initial cost - PW of the maintenance cost + PW of the annual savings + PW of the resale value

Present worth of the project = - 57673 - 5000*(P/G, 10%, 5) - 9000*(P/A, 10%, 5)*(P/F, 10%, 5) + 23331*(P/A, 10%, 10) + 29564*(P/F, 10%, 10)

Present worth of the project = - 57673 - 5000*6.862 - 9000*3.7908*.6209 + 23331*6.1446 + 29564*.3855

Present worth of the project = $41590.22

So, the present worth of the project is $41590.22 or $41590.