Question

Q2- Data for two very expensive printers are listed below. If the interest rate is 12%,...

Q2- Data for two very expensive printers are listed below. If the interest rate is 12%, based on equivalent uniform annual cost (EUAC), which printer should be bought?

please explain all steps and show equations. thank you.

A

B

First Cost

$30,000

$36,000

Annual Maintenance

1,500

2,000

Salvage value

5,000

8,000

Useful life

6 years

6 years
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Homework Answers

Answer #1
Project A:
Annual maintenance cost -1500
Annutiy PVF at 12% for 6 years 4.11141
Present value of Annual Maintenance cost -6167.12
First cost -30000
Total cash outflows -36167.1
Less: Present value of Salvage 2533.155
(5000*0.506631)
Net present value -33634
Divide: Anuity PVF 4.11141
Equiavalent Annual cashflows -8180.64
Project B
Annual maintenance cost -2000
Annutiy PVF at 12% for 6 years 4.11141
Present value of Annual Maintenance cost -8222.82
First cost -36000
Total cash outflows -44222.8
Less: Present value of Salvage 4053.048
(8000*0.506631)
Net present value -40169.8
Divide: Anuity PVF 4.11141
Equiavalent Annual cashflows -9770.32
Project A shall be Accepted
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