A manufacturer purchased $15,000 worth of equipment with a useful life of six years.

A manufacturer purchased $15,000 worth of equipment with a useful life of six years. Assuming 9% interest, the equivalent uniform annual cost of the equipment is _________.

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Expert Solution

The equivalent uniform annual cost is computed as follows:

= Price of equipment / Present value annuity factor of 9% of 6 years

Present value annuity factor of 9% of 6 years is computed as follows:

= [ (1 – 1 / (1 + r)ⁿ) / r ]

= [ (1 - 1 / (1 + 0.09)⁶ ) / 0.09 ]

= 4.48591859

So, the amount will be as follows:

= $ 15,000 / 4.48591859

= $ 3,343.80 Approximately

jeff jeffy answered 2 years ago

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