A new equipment is being considered at a local company at a cost of $200,000. The operation and maintenance costs of this equipment are estimated to be about $20,000 per year. Salvage value is expected to be $40,000 at the end of its useful life. The life of this equipment is estimated to vary anywhere from 5 to 9 years with the associated probabilities as shown in the table below. If an interest rate of 10% is used, what is the expected EUAC for this equipment?
$$\begin{array} { | l | l | l | l | l | l | }
\hline \text { Life, Years } & 5 & 6 & 7 & 8 & 9 \
\hline \text { Probability } & 0.3 & 0.1 & 0.15 & 0.20 & 0.25 \
\hline
\end{array}$$
A) $66,460
B) $55,970
C) $62,960
D) $58,206.2

Question

A new equipment is being considered at a local company at a cost of $200,000. The operation and maintenance costs of this equipment are estimated to be about $20,000 per year. Salvage value is expected to be $40,000 at the end of its useful life. The life of this equipment is estimated to vary anywhere from 5 to 9 years with the associated probabilities as shown in the table below. If an interest rate of 10% is used, what is the expected EUAC for this equipment?
$$\begin{array} { | l | l | l | l | l | l | } 
\hline \text { Life, Years } & 5 & 6 & 7 & 8 & 9 \
\hline \text { Probability } & 0.3 & 0.1 & 0.15 & 0.20 & 0.25 \
\hline
\end{array}$$
A) $66,460
B) $55,970
C) $62,960
D) $58,206.2

Quizplus · Accepted Answer

The Answer is D

A New Equipment Is Being Considered at a Local Company