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

PLEASE DRAW A CASH FLOW DIAGRAM AND THEN ANSWER! If
there is no diagram = Thumbs down!!!!!
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