Question

The annual worth calculated for the first life cycle with i = 15% was obtained as $-731. What will be the annual worth calculated for the second life cycle?

a. $-731

b. $-534361

c. None of the answers

d. $-365.5

Answer 1

Annual Worth is defined as equivalent uniform annual worth of all estimated benefits and costs during the life cycle of a project.

This means the cost or benefit is going to remain same throughout the life cycle of a project . Therefore annuity cost/benefits at year 2 ,3,4....,n will be equal to annuity cost/benefits at year 1 .

If we are have to double the life cycle the selected values will be repeated for succeeding life cycles in exactly same manner as for the first life cycle. Here, we have to make sure that the provided cash flow are same in the succeeding life cycles .

In the above question Annual Worth calculate at first life cycle is given as -$ 731. Therefore Annual Worth of second life cycle will be same as fist one as -$731.

Anwere Answer is option A -$731