A certain machine has the estimates shown below:
Machine  
First Cost ($)  20,000 
Annual operating cost ($/ year)  10,000 
Salvage value ($)  4,000 
Life (years)  10 
At an interest rate of 10% per year, the annual worth of this
machine is equal to:
Question 10 options:
$13,004 

$13,254 

$12,658 

$15,270 
Present value of cash outflows 

First value 
$20,000 

Annual costs (6.1446*$10,000) 
$61,446 

Less: Present value of salvage value ($4,000*0.3855) 
($1,542) 

Present value of cash outflows (A) 
$79,904 

Annuity factor for 10 years @ 10% (B) 
6.1446 

Annual worth of machine (C=A/B) 
$13,003.94 

Ans 
annual worth of this machine is equal to = $13,004 

Option (A) $ 13,004 is correct 
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