Question
A company buys a machine for $25,000. The annual cost of maintaining the machine is $500...
A company buys a machine for $25,000. The annual cost of
maintaining the machine is $500 per year for the first 5 years (End
of Year 1 thru End of Year 5) and then it increases to $750 for the
next 5 years (Year 6 thru Year 10). Consider all cash flows to be
end of year cash flows. For an interest rate of 8% per year
compounded yearly, find the annual maintenance cost of the machine
and the present worth of the total cost.
PLEASE HELP. SOLVE BY HAND
Homework Answers
Answer #1
The question pertains to the PV calculation of the maintainence cost. The discount rate mentioned for present value calculations is 8%. The solution is as follows:
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