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Hi,Dear sir let me know,this mcq solution with little explanation.
A machine costing $150,0000 has a use full life of eight years,after which time its estimated resale value will be $30,000.Annual running costs will be $6,000 for first three years of use and 8,000 for each of next five years.All running costs are payable on last days of the year to which they relate.
Using 20% discount rate,find EAC assuming machine is bought and replaced every eight years in perpetuity.
A)21,100
B)34,000
C)30,400
D)46,600Unless you were set this as a a test, then you must have an answer in whichever book you found the question and so I don’t know why you need me to give the answer 🙂
(If it was given you as a test, then we certainly do not do homework for people 🙂 )You need to calculate the present value of 1 machine, in the normal way.
Then to get the EAC you need to divide the PV you have calculated by the annuity discount factor for 8 years at 20%.For a full explanation of this (with examples) you need to watch our free lecture on Replacement.
Our free lectures are a complete course for Paper F9 and cover everything needed to pass the exam well.
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