1. What is the annual equivalent cost of the following repeating cash flow, assuming i =...

Question

Question

1. What is the annual equivalent cost of the following repeating cash flow, assuming i = 12%? t(years) = 0 1 2 3 4 5 6 7 8 9

Answer 1

Answer #1

The present worth of 1 life cycle is

DW 7000 3400 12700 PW = 10000 = 1.12 + 1.122 + 1.123 + 1.124

PW = $24, 355.25

This will be the present value after every 4 years

> PW = $24.355.25(1 + (A/F, 12%, 4) 0.12

> PW = $24, 355.25(1 +1.7436)

PW = $66,821.55

Therefore the present worth of the given cash flow = $ 66,821.55

Annual equivalent cost = 66,821.5% × 0.12 = $ 8,018.59

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Answer 2

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