Question

Capital Recovery-Perpetual 4. With interest at 8% compounded annually, how much money is required today to provide a perpetual income of $14,316 per year? Geometric Series 5. A new machine was bought for $9,000 with a life of six years and no salvage value. Its operating cost begins in year one in $7,000 and will increase by 5% every year. If the MARR =12% what is the annual equivalent cost of the machine? Simple Interest 6. If you borrow $3,000 at 6% simple interest per year for seven years, how much, you have to repay at the end of seven years?

Answer 1

4.

R = 8%

So,

Amount required today = 14316/8%

Amount required today = $178950

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5.

R = 12%

g = 5%

PW of the total cost = 9000 + (7000/(12% - 5%))*(1-(1.05/1.12)^6)

PW of the total cost = $41106.58

Let, annual equivalent cost of machine = P

Then,

P = 41106.58/((1-1/(1+12%)^6)/.12)

P =$9998.18 or $9998

Hence, the equivalent annual cost of the machine is $9998.18 or $9998.

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