The maintenance cost for a generator have been recorded over its five year life. Calculate EUAC...
The maintenance cost for a generator have been recorded over its five year life. Calculate EUAC at 8 percent per year.
|
Year |
1 |
2 |
3 |
4 |
5 |
|
Cost |
$1100 |
1500 |
1300 |
1900 |
2200 |
Homework Answers
Given
Rate of interest=i=8%
We first estimate the PV of future costs.
PV=-[1100*(F/P,8%,1)+1500*(F/P,8%,2)+1300*(F/P,8%,3)+1900*(F/P,8%,4)+2200*(F/P,8%,5)]
Let us calculate the interest factors
(F/P,8%,1)=1/(1+8%)^1=0.925926
(F/P,8%,2)=1/(1+8%)^2=0.857339
(F/P,8%,1)=1/(1+8%)^3=0.793832
(F/P,8%,1)=1/(1+8%)^4=0.735030
(F/P,8%,1)=1/(1+8%)^1=0.680583
PV=-[1100*0.925926+1500*0.857339+1300*0.793832+1900*0.735030+2200*0.680583]=-$6230.3483
EUAC=PV*(A/P,8%,5)
Let us calculate the interest factor.
EUAC=PV*(A/P,8%,5)=-6230.3483*0.250456 =-$1560.43
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