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Assume a machine costs $108,000 and lasts six years before it is replaced. The operating cost...

Assume a machine costs $108,000 and lasts six years before it is replaced. The operating cost is $17,200 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 15 percent? (Hint: the EAC should account for both initial investment and annual operating costs)

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Answer #1

Answer = EQUIVALENT ANNUAL COST = $45737.58591 or $45737.59

Explaination -

Note - negetive symbols indicate cash outflow. Here all figures are costs so each of them have a negetive sign.

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