Question

tha inte est rate Is 12% Ass n hat the ma mum econo mtal r ca 10 tna contr lar e firt c st ears and an e pectad narkat value o 11% of 13 e man1เล่ control nparat on Anual cnst cr th cur en math nd s 4 000 "the control er nas a san ca i An automatic process contra lar w l elmiate tha cum 12% peryaar aick the con 1n view the interest and annut, tatla for discrete compounding when te MARR Choose the corect anawarbelow A· Tre maximum economical price tor the controller is 516,878 O B. The maximum economical price for the controler is $26,355 C. The manmurm economical pnce tr the cortraller 529 254 O D. The ma imum ecoromical price orthe controller is 329,518. O E. The maximum economical price for the controller is $34355 e 9 240

Answer 1

Let first cost of controller be x

Market value at the end of the service life = 11% of x = 0.11x

Time period = 13 years

Interest rate = 12%

Calculate the equivalent annual cost of controller -

EAC = x(A/P, 12%, 13) - 0.11x(A/F, 12%, 13)

EAC = (x * 0.15568) - (0.11x * 0.003568)

EAC = 0.15568x - 0.0039248x

EAC = 0.1517552x

Annual cost of current method = $4,000

Equating the two annual costs -

0.1517552x = 4,000

x = 4,000/0.1517552

x = 26,358.24

The maximum economic price for the controller is $26,358.24

This is approximately equals to $26,365

Hence, the correct answer is the option (B).