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 | ||||

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