Maintenance costs on a certain piece of equipment are estimated to be $500, $600

Question

Maintenance costs on a certain piece of equipment are estimated to be $500, $600, $700, $800, and $900 at the ends of years 1, 2, 3, 4, and 5, respectively. The time value of money rate is 8 percent compounded annually.

What is the present value of the maintenance costs?

What is the uniform annual equivalent maintenance cost?

A series of 10 end-of-year deposits is made that begins with $7,500 at the end of year 1 and decreases at the rate of $300 per year with 11% interest.

What amount could be withdrawn at t = 10? $

What uniform annual series of deposits (n = 10) would result in the same accumulated balance at the end of year 10? $

Explanation / Answer

Years cost of maintenance present value@8% 1 500 462.96296 2 600 514.40329 3 700 555.68257 4 800 588.02388 5 900 612.52488 sum of present value 2733.5976 present value of maintenance answer no 2 Using PMT function we can find the uniform annual equivalent maintenance cost present value 2733.5976 nper 5 rate 8% using the command PMT(8%,5,-2733.59,0,0) uniform annual equivalent maintenance cost $684.65 answer no 3 year deposit compounded value @11% compounded value of investment 1 7500 2.3579477 17684.61 2 7200 2.1435888 15433.84 3 6900 1.9487171 13446.15 4 6600 1.771561 11692.3 5 6300 1.61051 10146.21 6 6000 1.4641 8784.6 7 5700 1.331 7586.7 8 5400 1.21 6534 9 5100 1.1 5610 10 4800 1 4800 sum of the compounded value 101718.4 amount he can withdrawan at year 10 101718.4 Using PMT function we can find the uniform annual deposit future value nper 10 rate 11% using the command PMT(11%,10,0,101718.4,0) uniform annual equivalent maintenance cost ($6,082.91) uniform equvalent deposit 6082.91

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