The annual maintenance costs associated with a machine are $1000 for the first 10 years and...
The annual maintenance costs associated with a machine are $1000 for the first 10 years and $2000 thereafter. The machine has a 30 year life. What is the present worth of the annual disbursements if the interest rate is 12%?
Homework Answers
Maintenance cost for first 10 years = $1000 per year
Maintenance cost for next 20 years = $2000 per year
Machine life = 30 years
Calculate the present worth at an interest rate of 12%.
PW = $1000 (P/A, 12%, 10) + $2000(P/A, 12%, 20) (P/F, 12%, 10)
PW = $1000 (5.6502) + $2000 (7.4694) (0.3220) = 10,460.49
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