A new punching machine will cost 3613 At the end of its 10 y

A new punching machine will cost $3613. At the end of its 10 years useful life, the machine can be sold for $717. The new machine will reduce annual expenses by $510. The interest rate is 10%.

Solution

The initial cost is $3613 and the machine will save $510. The salvage value is $717 and the rate of interest is 10%. Find the present worth

PW = -3613 + 510(P/A, 10%, 10) + 717(P/F, 10%, 10)

= -3613 + 510*6.1446 + 717*0.38554

= -202.82

This is the present worth.