Annual operating and maintenance costs for a pump in a pulp

Annual operating and maintenance costs for a pump in a pulp mill are expected to be as follows: The cost of capital is 10 percent. Determine the equivalent annual cost of this machine over its six-year life.

Solution

EQUIVALENT ANNUAL COST =5000( 1.1⁶ +1.1⁵) + 8000(1.1⁴+1.1³)+12000( 1.1²+1.1¹) = 66991 at the end of 6 yrs.
using same interest rate as if recurring deposit i.e.
Ax (( 1.1⁵ -1)/0.1) = 66991
A = (66991 /6.1) = 10982 per yr cost.