Question

Consider a project with a first cost (investment) of $250,000, an annual O&M cost of $50,000, annual revenue of $160,000, and a salvage value of $40,000 after a 10-year life. Find the annual worth of the project assuming an interest of 12% per year.

Answer 1

$68,030

Explanation:

According to the given situation, the computation of annual worth is shown below:-

Annual worth = -250,000 (A/P, 12%, 10) - $50,000 + $160,000 + $40,000 (A/F, 12%, 10)

= -$250,000 × 0.1770 - $50,000 + $160,000 + $40,000 × 0.0570

= -$44,250 - $50,000 + $160,000 + $2,280

= $68,030

So, the right answer is $68,030