Financial data related to three different alternatives are provided in the table

Question

Financial data related to three different alternatives are provided in the table below. Assume that alternatives are replaced at the end of their useful lives. Interest Rate i = 8%.

The Equivalent Uniform Annual Cost (EUAC) of Alternative P is

The Equivalent Uniform Annual Benefit (EUAB) of Alternative P is   

The Equivalent Uniform Annual Benefit (EUAB) of Alternative Q is                      .

The Equivalent Uniform Annual Cost (EUAC) of Alternative R is

Data P Q R Initial Cost $5000 $1000 $2500 Uniform Annual Benefits $650 $0 $350 Salvage Value $5000 $1760 $2000 Useful Life in Years 20 5 10

Explanation / Answer

EUAC of Alternative P = 5000(A/P , 8%, 20) - 5000(A/F, 8%,20) = 5000 x 0.1019 - 5000 x 0.0219 = $400

EUAB of Alternative P = $650   (Since the benefit per year is $650)

EUAB of Alternative Q = $0   (Since the benefit per year is 0)

EUAC of Alternative R = 2,500 (A/P, 8%, 10) - 2,000(A/F, 8%, 10) = 2,500(0.1490) - 2,000(0.0690) = $234.5

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