A security company offers to provide CCTV coverage for a parking garage for ten years for an initial payment of $ 50,000 and additional payments of $ 20,000 per year. What is the equivalent annual annuity of this deal, given a cost of capital of 7%?
The answer to this problem is -27,119 can someone please provide a formula/ steps or what to input into a financial calculator (if applicable).
| Year | Cashoutflows | PVF at 7% | Present value | |
| 0 | -50000 | 1 | -50000 | |
| 1 | -20000 | 0.934579 | -18691.6 | |
| 2 | -20000 | 0.873439 | -17468.8 | |
| 3 | -20000 | 0.816298 | -16326 | |
| 4 | -20000 | 0.762895 | -15257.9 | |
| 5 | -20000 | 0.712986 | -14259.7 | |
| 6 | -20000 | 0.666342 | -13326.8 | |
| 7 | -20000 | 0.62275 | -12455 | |
| 8 | -20000 | 0.582009 | -11640.2 | |
| 9 | -20000 | 0.543934 | -10878.7 | |
| 10 | -20000 | 0.508349 | -10167 | |
| Present value of outflows | -190471 | |||
| Divide: Annuity PVF at | 7.02358 | |||
| Equivalent Annual cost | -27118.8 | |||
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