1 A new machine was bought for $12,000 with a life of eight years and no salvage value. Its operating costs was follows: (beginning on first year = 5%. ) A₁. $8000, Determine the present equivalent (at time zero/PW) above accompanying Geometric Sequence of cash flows. Let MARR=10%

1 A new machine was bought for $12,000 with a life of eight years and no salvage value. Its operating costs was follows: (beginning on first year = 5%. ) A₁. $8000, Determine the present equivalent (at time zero/PW) above accompanying Geometric Sequence of cash flows. Let MARR=10%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1 A new machine was bought for $12,000 with a life of eight years and no salvage value. Its operating costs w
follows (beginning on first year = 5%. ) A₁- $8000, Determine the present equivalent (at time zero/PW of
above accompanying Geometric Sequence of cash flows. Let MARR=10%

Expert Solution

Step 1: State the information

Initial cost=$12000

Salvage value=0

Operating cost at year 1=8000

Operating cost increases by 5% each year

MARR=10%

Tima=8 years

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