Calculate the perpetual equivalent annual cost (years 1 to ∞) of $775,000 now and $825,000, 5...

Question

Question

Calculate the perpetual equivalent annual cost (years 1 to ∞) of $775,000 now and $825,000, 5 years from now at an interest rate of 14% per year.

The perpetual equivalent annual cost is determined to be $_____.

business economics

Answer 1

Answer #1

Perpetual equivalent annual cost

= (First cost + present value of future cost) * rate of interest

= 775000*14% + 825000*((1.14)^-5)*14%

= $168,487

Therefore the annual cost is $168,487

Answer 2

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