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7.20 Compute the EUAC of the machine of problem 7.15 (7.15 A used machine costs $20000...

7.20 Compute the EUAC of the machine of problem 7.15 (7.15 A used machine costs $20000 to purchase. It has annual maintenance cost of $20000, a salvage value of $5000, and a 10 year life. If the interest rate is 10% per year, compounded annually, what is the present-worth of the machine? Answer--- $140,960.12), using the result of problem 7.15. The answer should be $22941.26 per year

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Answer #1

Ans) Cost of machine = $ 20000

Annual maintenance cost = $ 20000

    Salvage value = $ 5000

  Time = 10 years

Interest rate = 10%. Present worth of cost = Initial cost +Present value of cost- Salvage value

   Present worth of Machine = 20000*[(1+0.10)^10-1]/0.10(1+0.10)^10 -5000/(1+0.10)^10+20000

= 20000*[1.5937424601/0.259374246]-5000/2.593742+20000

  = 31874.8/0.2593-1927.733 +20000

  = 122891.342-1927.733+20000

  = 140960.12  

= Present value interest factor annuity = ( 1+k)^n-1/k(1+k)^n

= Present value interest factor = 1/(1+k)^n.

Where K = rate of interest , n= life of machine

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