Professor Xavier is creating a budget for his recently awarded 11-year research grant. His research requires...

Professor Xavier is creating a budget for his recently awarded 11-year research grant. His research requires machinery that has an initial cost of $48,605. He will need to pay for maintenance on the machinery beginning at the end of year 3. He estimates the first year of maintenance will cost $2,679, with the maintenance costs increasing by $701 per year each subsequent year. How much should he put in the budget today for maintenance costs? Assume he will pay maintenance until the end of the research grant. He is using a MARR of 9%.

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Professor Xavier
Particulars	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Total
Maintenance cost	-	-	2,679.00	3,380.00	4,081.00	4,782.00	5,483.00	6,184.00	6,885.00	7,586.00	8,287.00	49,347.00
PV factor at 9%	0.92	0.84	0.77	0.71	0.65	0.60	0.55	0.50	0.46	0.42	0.39
Present Value	-	-	2,068.68	2,394.48	2,652.37	2,851.35	2,999.39	3,103.54	3,170.05	3,204.41	3,211.48	25,655.75

So, he should put in $ 25,655.75 in the budget today for maintenance costs.

ekkarill92 answered 1 year ago

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