Question

Ti ese grants forever. 3. McNeese State University is planning to transport teams during their games in other cities in ting and maintenance costs that start at $20,000 the first year and $1000 per year. Assume that the salvage interest rate is 5%. What is the equivalent annual cost of owning an truck? ty is planning to purchase a Bus for their athlete department to in other cities. The bus will cost $600,000 and have art at $20,000 the first year and increases by me that the salvage value at the end of 10 years is $150,000 and nt annual cost of owning and operating the

Answer 1

ANSWER:

I = 5%

N = 10

AW = initial cost(a/p,i,n) + maintenance cost in 1st year + increase in maintenance cost(a/g,i,n) + salvage value(a/f,i,n)

aw = -600,000(a/p,5%,10) - 20,000 - 1,000(a/g,5%,10) + 150,000(a/f,5%,10)

aw = -600,000 * 0.1295 - 20,000 - 1,000 * 4.099 + 150,000 * 0.0795

aw = -77,700 - 20,000 - 4,099 + 11,925

aw = -89,874

so the equivalent annual cost of owning and operating the truck is -$89,874