Question

# An engineer uses an economic analysis to determine if is worth to purchase the machine. The...

An engineer uses an economic analysis to determine if is worth to purchase the machine. The rate of return is 6% . What is the future worth of the machine? Initial cost = \$9,000 Estimated life = 8 years Salvage value = 900 Annual maintenance cost = \$450 Annual maintenance income = 2,450 Income gradient = 100

Initial cost = \$9,000

Annual maintenance cost = \$450

Annual maintenance income = \$2,450

Salvage value = 900

Interest rate = 6%

Estimated life = 8 years

Calculate the Future Worth -

Future worth = -Initial cost (F/P, i, n) - Annual maintenance cost (F/A, i, n) + Annual maintenance income (F/A, i, n) + income gradient (F/G, i, n) + Salvage value

Future worth = -\$9,000(F/P, 6%, 8) - \$450 (F/A, 6%, 8) + \$2,450 (F/A, 6%, 8) + 100 (F/G, 6%, 8) + \$900

Future Worth = (-\$9,000 * 1.5938) - (\$450 * 9.8974) + (\$2,450 * 9.8974) + (\$100 * 31.6244) + \$900

Future Worth = -\$14,344.2 - \$4,453.83 + \$24,248.63 + \$3,162.44 + \$900

Future Worth = \$9,513.04

The Future Worth of the machine is \$9,513.04

The future worth of machine is positive.

So,

The machine should be purchased.

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