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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