If needed use the interpolation technique if the compound in

If needed, use the interpolation technique if the compound interest tables do not provide the value of interest factors.

(2) Alice Bricker, a maintenance manager of a local plant in reviewing the maintenance records of production equipment, has compiled the following maintenance cost data: 5 years ago S500; 4 years ago S 600; 3 years ago $700; 2 years ago S800; and Last year S900. After consulting with an equipment specialist, she has compiled the maintenance cost data for the current year and the next four years. She figures that the maintenance cost this year will be S1,150 and wil increase at the rate of $250 each year. Assuming an interest rate of 10 %, compute the equivalent uniform annual cost.

Solution

ANSWER:

i = 10%

annual maintenance cost = $1,150

gradient = $250

n = 5

euac = annual maintenace cost + gradient(a/g,i,n)

euac = 1,150 + 250(a/g,10%,5)

euac = 1,150 + 250 * 1.81

euac = 1,150 + 452.5 = 1,602.5

so the equivalent uniform cost is $1,602.5