Question

Using Microsoft Excel:

1. A machine will cost $50,000 to purchase. Annual operating cost will be $3,000. This machine will save $15,000 per year in labor costs. The salvage value after 5 years will be $10,000. Calculate the machine’s equivalent uniform annual worth (EUAW) for the interest rate of 8%.

2. The maintenance cost for a generator have been recorded over its five year life. Calculate EUAC at 8 percent per year.

Year	1	2	3	4	5
Cost	$1100	1500	1300	1900	2200

Thank you

Answer 1

Q1.
Initial investmente				-50000
Annual operating cashflows:
Annual savings			15000
Less: Annual ccost			3000
Annual Cashflows			12000
Multiply: Annuity PVF at 8%			3.99271
present value of inflows				47912.52
Present value of salvage (10000*0.680583)				6805.83
Net present value				4718.35
Divide: Annuity PVF				3.99271
EUAW				1181.741
Q2.
Year	Cashflows	PVF at 8%	Present Value
1	-1100	0.925926	-1018.52
2	-1500	0.857339	-1286.01
3	-1300	0.793832	-1031.98
4	-1900	0.73503	-1396.56
5	-2200	0.680583	-1497.28
Net present value			-6230.35
Divide: Annuity PVF			3.99271
EUAC			-1560.43