Question 7 (10 points) Calculate the equivalent annual cost for years 1 through infinity of $1,000,000...

Question

Question

Question 7 (10 points) Calculate the equivalent annual cost for years 1 through infinity of $1,000,000 now and $1,000,000 thr

Answer 1

Answer #1

Answer

the formula for present value is:

PV = FV *(1 + i)- = 1000000 * (1.05-3) = 863837.599

the present value of the amount after 3 years is $863837.599

total PV =1000000+863837.599

=1863837.599

annual cost =PV*i

=1863837.599*0.05

=93191.88

the annual cost amount is $93192

Option 3

Answer 2

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