Question

Max-Heat Furnaces cost $400 to purchase and results in an electricity bill of $160 per year. The Max-Heat Furnaces lasts for 4 years. The discount rate is 21%. What is the equivalent annual cost? Enter your response below. Number Click "Verity to proceed to the next part of the question. Section Attempt 1 of 1 Verity

Answer 1

Solution :

The Equivalent Annual cost is = - $ 317.4530

= - $ 317.45 ( Rounded off to two decimal places )

= - $ 317 ( Rounded off to the nearest whole number )

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

13.03.2020 - Microsoft Excel ES HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW F Η Ι (1) Statement showing Calculation of Equivalent Annual Cost SI.No. Year Particulars Cash Flow PVF @ 21% Discounted Cash Flows (2) (3) = (1) * (2) O Intial Cost $ 400.00 1.0000 $ - 400.0000 1 Electricity cost Year 1 -160.00 0.8264 $ -132.2314 2 Electricity cost Year 2 $ -160.00 0.68301 $ -109.2822 3 Electricity cost Year 3 $ -160.00 0.5645 $ -90.3158 4 Electricity cost Year 4 $ -160.00 0.4665 $ -74.6412 Total of Discounted cash Outflows - (A) = SUM(G4G8) -806.4706 Annuity Factor for 4 years @ 21% - (B) =SUM(F5:F8) 2.5404 Equivalent Annual Cost = (Total of Discounted Cash Outflows / Annuity -317.4530 Factor for 4 years @ 21%) = (A)/(B) Equivalent Annual Cost Rounded off to two decimal places) -317.45 Equivalent Annual Cost (Rounded off to the nearest whole number) -317 بي اما با دادا مي