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 2 months ago

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