White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its...

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White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, and HVAC equipment with newer models in one entire center built 11 years ago. 11 years ago, the original purchase price of the equipment was $725,000 and the operating cost has averaged $235,000 per year. Determine the equivalent annual cost of the equipment if the company can now sell it for $244,000. The companys MARR is 22% ear. The equivalent annual cost of the equipment is determined to be $

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Answer 1

Answer #1

Statement showing EAC

Partciuars	0	1	2	3	4	5	6	7	8	9	10	11
Purchase price	-725000
Operating cost		-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00
Salvage value												244000
Total cash flow	-725000	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	-235000.00	9000.00
PVIF @ 22%	1	0.82	0.67	0.55	0.45	0.37	0.30	0.25	0.20	0.17	0.14	0.11
Present value	-725000	-192622.95	-157887.66	-129416.12	-106078.79	-86949.82	-71270.35	-58418.32	-47883.87	-39249.07	-32171.37	1009.91	-1645938.404
PVIFA(22%,11 years)													4.04
EAC( Total of PV/PVIFA)													-407410.5

Thus EAC = 407410.5

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Answer 2

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