Skyward Construction has just purchased a new D9 bulldozer for $675,000. The annual insurance is $7,000....

Skyward Construction has just purchased a new D9 bulldozer for $675,000. The annual insurance is $7,000. The annual maintenance cost for the first 4 years is $12,500, at which time the equipment is given a major overhaul for $75,000. For the next 4 years the annual maintenance cost is $22,500. At that time the piece has a salvage value of $100,000. Draw the cash flow diagram. What is the present value of the investment? What is the EUAC? Assume a 5.% annual inflation rate.

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Expert Solution

New D9 bulldozer = $675,000

Annual insurance = $7,000

Annual maintainance cost for first four years = $12,500

Present Value of Investment:

Present value = = 675000 + 45242.489 + 44324.381 + 61702.686 + 65638.400 - 67683.936 = $ 824224.02

EUAC:

EUAC = = $ 127525.435

Ally Wells answered 1 year ago

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