Question

Anderson-McKee Construction expects to spend $835,000 for heavy equipment replacement now and another $1.1 million two (2) years from now. What equivalent annual revenue (i.e., every 12 months) over the next 4 years justifies purchase of the new machines? Assume the company's MARR is 8% per year compounded quarterly.

please show cash flow diagram and use tabulated factors to solve

Answer 1

caluculation of Estimated Annual Revence 109000 $ 8.35.000 3 4 Coutflow (c.outflow] Step: 4. calculation of NPU is P.v@8% - computation 835000 83 5000 Year out Flow 0.925 100 000 0857 ) 9 42700 0.93 0.935 There is Theregole no into about cash anglows = -1479200 $-1972 700 NPV NPU P.U of cash inflows- P.U of cash out flows

step: 2 Equivalent Annual Cost of NPU x 8 1-(1to) -1777,700 x 8% - (1787) -4 You - 142,216 (1.0854 00E - 142,216 ។ laba) 11 - 142,216 11-0.735) 142,216 0.265 -$1536,664

Therefore, $536, 664 has to be strnually for next purchare machine. Recovered to justify years new