Question

An industrial sewing machine costs $6760 and is expected to have a scrap value of $3732...

An industrial sewing machine costs $6760 and is expected to have a scrap value of $3732 whenever it is retired. Operating and Maintenance costs are $1852 for the first year and expected to increase by $1923 thereafter. If the MARR is 9%, determine the minimum equivalent uniform annual cost associated with the optimal economic life of the machine. The service life of this machine is 5 years

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Answer #1
year annual cash flow PVF9% cash flow *PVF
0 6760 1 6760
1 1852 .91743 1699.08
2 1852+1923=3775 .84168 3177.34
3 3775+1923= 5698 .77218 4399.88
4 5698+1923= 7621 .70843 5398.95
5 7621+1923= 9544 .64993 6202.93
5 -3732

.64993

 -2425.54
Net Total cost 25212.64

**Find PVF using the formula 1/(1+i)^n where i =9% ,n =1,2,3,4,5

**PVA9%,5= 3.88965 (can be find from present value annuity factor table)

minimum equivalent uniform annual cost = Net total cost /PVA9%,5

                       = 25212.64 /3.88965

                          = $ 6481.98

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