A certain fluidized-bed combustion vessel has an investment cost of $88:000: a l

Question

A certain fluidized-bed combustion vessel has an investment cost of $88:000: a life of 8 years, and negligible market (resale) value. Annual costs of materials, maintenance, and electric power for the vessel are expected to total $11,000. A major relining of the combustion vessel will occur during the fifth year at a cost of $35,000. If the interest rate is 18% per year, what is the lump-sum equivalent cost of this project at the present time? Click the icon to view the interest and annuity table for discrete compounding when i = 18% per year. The lump-sum equivalent cost of this project at the present time equals (Round to the nearest dollar. Enter your answer as negative value.)

Explanation / Answer

Total cost PV is -148152

PV=A/(1+r/100)^t

Year Cost amount Discounting factor PV 0 investment 88000 1 88000 1 cost of material & other 11000 0.847457627 9322.034 2 cost of material & other 11000 0.71818443 7900.029 3 cost of material & other 11000 0.608630873 6694.94 4 cost of material & other 11000 0.515788875 5673.678 5 cost of material & other 11000 0.437109216 4808.201 6 cost of material & other 11000 0.370431539 4074.747 7 cost of material & other 11000 0.313925033 3453.175 8 cost of material & other 11000 0.266038164 2926.42 5 relining cost 35000 0.437109216 15298.82 Total cost PV value 148152

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