Question

system currently costs $5,000 per year in energy and maintenance costs. The system is in acceptable...

system currently costs $5,000 per year in energy and maintenance costs. The system is in acceptable shape and is expected to last at least 15 years. With a discount rate of 6%, what is the present value of this investment over a 10-year period? Assume that the yearly costs occur at the end of each year.

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Answer #1

Given,

A = 5,000

i = 6%

n = 10

Present value = A(P/A, i, n)

                       = 5,000(P/A, 6%, 10)

                       = 5,000(7.360)

                       = $36,800

Thus, the present value of this investment over a 10-year period is $36,800.

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