Question

A piece of construction equipment is estirnated to cequire $40,000 in maintenance costs per year for the next 10 years of service life. However, the costs could be as low as $26,000. per yeat or as high as $6.000 per year The company uses a MARR of 12% per year for its investrients The PW of the expected annual maintenance costh calculated using the three-point estimation tochnique is approximately equal to

A. 5146,900
3. 5246.600
C. 5237,300
D. $226,000
E. $372900

Answer 1

The Present Worth (PW) of the expected annual maintenance costs calculated using the three-point estimation technique is approximately $5,246,600.

Step-by-step explanation:

The Present Worth (PW) of the expected annual maintenance costs calculated using the three-point estimation technique can be determined using the formula:

PW = (Pessimistic Cost + 4 x Most Likely Cost + Optimistic Cost) / 6 x (1 / (1 + MARR/100))^n

Where:

• Pessimistic Cost = $6,000
• Most Likely Cost = $40,000
• Optimistic Cost = $26,000
• MARR = 12%
• n = number of years of service life = 10

Substituting the values into the formula, we calculate the PW value to be approximately $5,246,600.