Annual maintenance costs for a machine are P1 500 this year and are estimated to increase...
Annual maintenance costs for a machine are P1 500 this year and are estimated to increase by 10% each year every year. What is the present worth of the maintenance costs for six years if i = 8%?
Homework Answers
present worth of cost = cost(1)/(1+r) + cost(2)/(1+r)2 .......................... cost(n)/(1+r)n
= 500/1.08 + 500*(1.1)/1.082 .................... + 500*(1.1)5/1.086
= (500/1.08)*(((1.1/1.08)^6) -1)/((1.1/1.08) - 1)
= 2909.59
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