Homework Answers
Present value of cash flows
=45000+15000/(1+12%)^1+17000/(1+12%)^2+19000/(1+12%)^3+21000/(1+12%)^4+23000/(1+12%)^5-9000/(1+12%)^5
=106759
in the above calculations, we excluded salvage value of 9000 because this is a cash inflow which will lower the annual costs
annual equivalent cost is
=PV/((1-(1+r)^(-n))/r)
=106759/((1-(1+12%)^(-5))/12%)
=29616, so the nearest option answer is 29600
the above is answer..
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