Given Cash flows for an investment Year 1 2 3 4 5 Cash flow

Given: Cash flows for an investment. Year 1 2 3 4 5 Cash flow $400 500 600 700 -2,000 Required: EUAC at 5% per year.

Solution

Year cash flows PVF @5% Present value 1 400 0.952381 380.9524 2 500 0.907029 453.5147 3 600 0.863838 518.3026 4 700 0.822702 575.8917 5 -2000 0.783526 -1567.05 Present worth 361.61 Divide: Annuity factor 4.3295 Equivalent Annual cost 83.52