Question

How do you solve for

If Machine A has a NPW of $29,282 and Machine B has a NPW of $40,847 over an 8-year period, what is the difference in the annual worth of Machine B over Machine A at a rate of 10% p. y. c. y?

Right answer:	$2,168
Answers:	$1,579
	$1,789
	$2,168
	$2,328

Answer 1

$2,168

Working:

a.	Present Value of annuity of 1			=	(1-(1+i)^-n)/i			Where,
				=	(1-(1+0.10)^-8)/0.10			i	10%
				=	5.3349262			n	8
b.	Difference in NPW			=	$       40,847	-	$       29,282
				=	$       11,565
c.	Difference in annual worth			=	$       11,565	/	5.3349262
				=	$         2,168
	Note:
	NPW is the present value of annual worth.