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use excel and show formulas A piece of equipment will cost $325,000 new, have a six...

use excel and show formulas A piece of equipment will cost $325,000 new, have a six year life and a salvage value of $100,000. Maintenance costs are $30,000 for year 1 and increase at the rate of 6% per year. Determine the annual cost of this machine if i=12%

Solutions

Expert Solution

Step 1: Cash flow table

Year Initial cost Salvage Maintenance costs Net cash flow
0 -325000 -325000.00
1 -30000 -30000.00
2 -31800 -31800.00
3 -33708 -33708.00
4 -35730.5 -35730.48
5 -37874.3 -37874.31
6 100000 -40146.8 59853.23

Step 2: Find NPV as

-415003.92

Step 3: Find Annual cost =

$100,939.63

WORKINGS

jeff jeffy answered 8 months ago
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