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The costs associated with a small X-ray inspecon system are $40,000 now and $24,000 per...

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Finance

The costs associated with a small X-ray inspecon system are $40,000 now and $24,000 per year, with a $6000 salvage value aer 3 years. Determine the equivalent uniform annual cost of the system if the real interest rate is 10% per year and the inflation rate is 4% per year. Draw your original cash flow, your final cash flow, and include all of your (X/X, i, n) factors.

Here is my work:

Nominal interest rate = Real interest rate + Inflation rate = 10% + 4% = 14% (Discount rate)

Equivalent annual cost, EAC ($) = 40,000 x A/P(14%, 3 years) + 24,000 - [6,000 / (1.14)3]

= 40,000 x 0.43 + 24,000 - (6,000 / 1.4815)

= 17,200 + 24,000 - 4,050

EAC = $37,150

How do I draw this out?

Answer & Explanation Solved by verified expert
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