A polisher costs $10,000 and will cost $20,000 a year to operate and maintain.If the discount rate is 10% and the polisher will last for 5 years,what is the equivalent annual cost of the tool?
A) $17,163.04
B) $22,187.84
C) $22,637.98
D) $19,411.15

Question

Quizplus · Accepted Answer

PV = −$10,000 + −$20,000[(1 / 0.1) − 1 / 0.1(1.1)⁵] = −$85,815.74 The equivalent annual cost is the payment with the same present value. So, using a financial calculator: n = 5; i = 10%; PV = −$85,815.74; FV = 0; CPT PMT = $22,637.98

A Polisher Costs $10,000 and Will Cost $20,000 a Year