QUESTION 4 10000 5700 STION 5 Solution Annual Om cost 2000 A

QUESTION 4 $10,000 $5,700 STION 5

Solution

Annual O&m cost -2000 Annuity Present value factor for 5 years 3.8897 Present value f outflows -7779.4 Add: Initial invstment -10000 Total outflows -17779.4 Less: Present value of salvage 3704.43 (5700*0.6499) Net present cost -14075 Divide: Annuity 3.8897 Annual equivalent cost -3618.53 Answer is e. $ 3600