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In part a when trying to find the equivalent annual cost method for deciding when we get the lowest value why do we use the annuity factor every year after discounting the net present value?
If the equivalent annual cost = X, then to get the PV of X per year we multiply X by the relevant annuity factor.
Here we are working backwards. We know the PV so dividing by the annuity factor gives the equal amount per year.
It would seem that you are not watching my free lectures, because I spend. time explaining all of this in my lectures on replacement. You cannot expect me to type out my lectures here 🙂
no it is not that i have not listened to your lectures but sometimes i forget certain things and need to ask again when i start doing the exam kit. sorry. but yes it is not expected for you to type the lecture out again here… understood the annuity value now though. thank you!
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