The initial cost of a machine is $727,000 with annual operating costs of $39,600.Each machine has a life of 5 years before it is replaced.Ignore taxes.What is the equivalent annual cost of this machine if the required return is 16 percent?

Question

Quizplus · Accepted Answer

PV_Costs = $727,000 + $39,600[(1 − 1 / 1.16⁵)/ 0.16] = $856,662.03 $856,662.03 = EAC[(1 − 1 / 1.16⁵)/ 0.16] EAC = $261,632.62

The Initial Cost of a Machine Is $727,000 with Annual