A machine costing $150 000 has a useful life of eight years, after which time its estimated resale value is $25 000. Annual running costs will be $5 000 for the first three years of use and then $8 000 for each of the next five years. All running costs are payable on the last day of the year to which they relate. Required: Using discount rate of 20% per annum, calculate the annual equivalent cost of using the machine if it were bought and replaced every night years in perpetuity (to the nearest $100) (Round discount factor to two decimal places)
A machine costing $150 000 has a useful life of eight years, after which time its estimated resale value is $25 000. Annual running costs will be $5 000 for the first three years of use and then $8 000 for each of the next five years. All running costs are payable on the last day of the year to which they relate. Required: Using discount rate of 20% per annum, calculate the annual equivalent cost of using the machine if it were bought and replaced every night years in perpetuity (to the nearest $100) (Round discount factor to two decimal places)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A machine costing $150 000 has a useful life of eight years, after which time its estimated
resale value is $25 000. Annual running costs will be $5 000 for the first three years of use
and then $8 000 for each of the next five years. All running costs are payable on the last day
of the year to which they relate.
Required:
Using discount rate of 20% per annum, calculate the annual equivalent cost of using the
machine if it were bought and replaced every night years in perpetuity (to the nearest $100)
(Round discount factor to two decimal places)
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