A machine that has been used for one year has a salvage value of $16,000 now which will drop by $1,000 per year. The maintenance costs for the next two years are $4,000 and $4,000. All the above values are expressed in real terms. It is also known that market interest rate over next 2 years will be 8% while expected inflation is 2% per year. Define the equivalent annual cost of the machine over 2 years in today's dollars. (Present your answer in dollars without $ sign and with 2 decimal places)

A machine that has been used for one year has a salvage value of $16,000 now which will drop by $1,000 per year. The maintenance costs for the next two years are $4,000 and $4,000. All the above values are expressed in real terms. It is also known that market interest rate over next 2 years will be 8% while expected inflation is 2% per year. Define the equivalent annual cost of the machine over 2 years in today's dollars. (Present your answer in dollars without $ sign and with 2 decimal places)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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