Homework Answers
Initial cost = 7,000,000
Annual cost = 860,000
Annual revenue = A
Time = 3 years
MARR = 10%
To find A we use the rule NPV = 0
-7,000,000 + (A - 860,000)(P/A, 10%, 3) = 0
This gives A = 7,000,000(A/P, 10%, 3) + 860,000
A = 7,000,000*(0.10*1.10^3)/(1.10^3-1) + 860,000
= 3,674,804
Hence required annual revenue is $3,674,804
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