Question

An injection molding system has a first cost of $160,000 and an annual operating cost of $81,000 in years 1 and 2, increasing by $5,500 per year thereafter. The salvage value of the system is 25% of the first cost regardless of when the system is retired within its maximum useful life of 5 years. Using a MARR of 8% per year, determine the ESL and the respective AW value of the system.

The ESL is year(5) and AW value of the system is $__________________ .

Incorrect answers 479,881.50,471,254.77 i have tried using a negative value with not luck

Answer 1

Using Excel for ESL analysis

Year	Discount factor	O&M cost	PV (O&M)	Cumulative (O&M)	Cumulative (O&M) + Initial Cost	Salvage value	PV (Salvage value)	NPV	(A/P,8%,n)	EUAC
A	B	C	D=C*B	E	F=E+160000	G	H=G*B	I=F-H	J	K = I*J
1	0.92593	81000.00	75000.00	75000.00	235000.00	40000.00	37037.04	197962.96	1.08000	213800.00
2	0.85734	81000.00	69444.44	144444.44	304444.44	40000.00	34293.55	270150.89	0.56077	151492.31
3	0.79383	86500.00	68666.49	213110.93	373110.93	40000.00	31753.29	341357.64	0.38803	132458.21
4	0.73503	92000.00	67622.75	280733.68	440733.68	40000.00	29401.19	411332.49	0.30192	124189.83
5	0.68058	97500.00	66356.86	347090.54	507090.54	40000.00	27223.33	479867.21	0.25046	120185.84
Discount factor	1/(1+0.08)^n
(A/P,i,n)	i((1 + i)^n)/((1 + i)^n-1)

ESL = 5 yrs

AW = -120185.84 ~ -120186 (use decimal value or rounded off value with negative sign)

Pls comment if you require further explanation or help

Showing formula in excel

Year	Discount factor	O&M cost	PV (O&M)	Cumulative (O&M)	Cumulative (O&M) + Initial Cost	Salvage value	PV (Salvage value)	NPV	(A/P,8%,n)	EUAC
A	B	C	D=C*B	E	F=E+160000	G	H=G*B	I=F-H	J	K = I*J
1	=1/(1.08)^A24	81000	=C24*B24	=D24	=160000+E24	40000	=G24*B24	=F24-H24	=0.08*((1 + 0.08)^A24)/((1 + 0.08)^A24-1)	=I24*J24
2	=1/(1.08)^A25	81000	=C25*B25	=E24+D25	=160000+E25	40000	=G25*B25	=F25-H25	=0.08*((1 + 0.08)^A25)/((1 + 0.08)^A25-1)	=I25*J25
3	=1/(1.08)^A26	=C25+5500	=C26*B26	=E25+D26	=160000+E26	40000	=G26*B26	=F26-H26	=0.08*((1 + 0.08)^A26)/((1 + 0.08)^A26-1)	=I26*J26
4	=1/(1.08)^A27	=C26+5500	=C27*B27	=E26+D27	=160000+E27	40000	=G27*B27	=F27-H27	=0.08*((1 + 0.08)^A27)/((1 + 0.08)^A27-1)	=I27*J27
5	=1/(1.08)^A28	=C27+5500	=C28*B28	=E27+D28	=160000+E28	40000	=G28*B28	=F28-H28	=0.08*((1 + 0.08)^A28)/((1 + 0.08)^A28-1)	=I28*J28
Discount factor	1/(1+0.08)^n
(A/P,i,n)	i((1 + i)^n)/((1 + i)^n-1)