Question

13-12 A vehicle has a first cost of $25,000. Its market value A declines by 15% annually. It is used by a firm that estimates the effect of older vehicles on the firm's image. A new car has no "image cost." But the image cost of older vehicles climbs by $800 per year. The firm's MARR is 10%. Find the minimum EUAC for this vehicle and its economic life.

Answer 1

	N	A	B	PV=B/(1.1^N)	C	D	E=D/(1.1^N)	F=C-E	G (Using PMT function with Rate=10%, Nper=N,Pv=-F)
	Year	First Cost	Image cost	Present value(PV) of Costs	Cumulative PV of Costs	Market value	PV of Market value	Net Present Cost	Equivalent Uniformannual Cost(EUAC)
	0	$25,000		$25,000	$25,000
	1		$800	$727	$25,727	$21,250	$19,318	$6,409	$7,050	Excel Command: PMT(10%,1,-6409))
	2		$1,600	$1,322	$27,050	$18,063	$14,928	$12,122	$6,985	Excel Command: PMT(10%,2,-12122))
	3		$2,400	$1,803	$28,853	$15,353	$11,535	$17,318	$6,964	Excel Command: PMT(10%,3,-17318))
	4		$3,200	$2,186	$31,038	$13,050	$8,913	$22,125	$6,980	Excel Command: PMT(10%,4,-22125))
	5		$4,000	$2,484	$33,522	$11,093	$6,888	$26,634	$7,026	Excel Command: PMT(10%,5,-26634))
	6		$4,800	$2,709	$36,232	$9,429	$5,322	$30,909	$7,097	Excel Command: PMT(10%,6,-30909))
	7		$5,600	$2,874	$39,105	$8,014	$4,113	$34,993	$7,188	Excel Command: PMT(10%,7,-34993))
	8		$6,400	$2,986	$42,091	$6,812	$3,178	$38,913	$7,294	Excel Command: PMT(10%,8,-38913))
	9		$7,200	$3,054	$45,144	$5,790	$2,456	$42,689	$7,412	Excel Command: PMT(10%,9,-42689))
	10		$8,000	$3,084	$48,229	$4,922	$1,898	$46,331	$7,540	Excel Command: PMT(10%,10,-46331))
	Minimum EUAC	$6,964
	Economic Life	3 Years