Question

Show your complete solution. Draw the cash-flow diagram of the
following problem.

The maintenance cost of a certain equipment is ₱ 32,000 per year for the
first five years, ₱ 45,000 per year for the next five years and ₱ 15,000 at the
end of the 4th year and 6th year. Find the equivalent uniform annual cost
of maintenance if money is worth 10% compounded annually.

Answer 1

Answer :

Step 1 : Present Value calculation :

Year	Cash Flow	PVF@10%	NPV
1	32,000	0.909	29,088
2	32,000	0.826	26,432
3	32,000	0.751	24,032
4	15,000	0.683	10,245
5	32,000	0.621	19,872
6	15,000	0.564	8,460
7	45,000	0.513	23,085
8	45,000	0.467	21,015
9	45,000	0.424	19,080
10	45,000	0.386	17,370
Total			198,679

Step 2 : Equivalent uniform annual cost(C) :

C = r(NPV) / (1-(1+r)^-n)

r = 10%

n = 10 years

NPV = 198,679

C = 0.10(198,679) / (1-(1+0.10)^-10)

= $32,334.09