Kal Tech Engineering is investigating the possibility of acquiring new automated

Question

Kal Tech Engineering is investigating the possibility of acquiring new automated packaging
equipment at a cost of $12,000. The equipment will have a salvage value of $1,000 at the end
of its useful life of 10 years. It is determined by the plant engineering department at the
company that the operation and maintenance cost will be $500 in the first year and will
gradually increase every year starting year 2 at the rate of $50 until the equipment is retired.
Determine the equivalent uniform annual cost (EUAC) if MARR for the company is 10%.

Explanation / Answer

EUAC = 1/10 ( 12000 +500/1.1 - 550/1.12 + 600/1.13 + 650/1.14 + 700/1.15 + 750/1.16 + 800/1.17 + 850/1.18 + 900/1.19 + 950/1.110 - 1000/1.110) = 1583.13/annum

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