city is going to buy a new fre truck Due to expanded growth

city is going to buy a new fre truck Due to expanded growth in a certain portion of the city, new fre fighting capacity is needed A 12 year trock can be of the asset with an nterest rate 0,8% per year and decode a Present value $72,000 Annual cost 5,500 Salvage value $7,200 Lite is years 12 year sagood abernabe a PW-72.524 b PW 106,000 PW-110 590

Solution

Answer is option c i.e. PW =-110,590

PW=

-pv - annual cost*[(1+ r)^n-1]/[r*(1+r)^n]+salvage vale*(1/(1+r)^n)

= -72,000-5,500[(1+0.08)^12-1]/[0.08*(1+0.08)^12]+7,200*[1/(1+0.08)^12]

=-72,000-41,447+2,860=-110,587 or rounded to 110,590.