Calculate the following 3 cash flows using EUAW for purchase. The annual costs a

Question

Calculate the following 3 cash flows using EUAW for purchase. The annual costs are associated with three new extruder machines being considered for use in a Styrofoam cup plant tData Machine 1 Machine 2Machine3 Useful life (years) First Cost Salvage Value Annual Benefit M&O; Annual Expenses M&O; Gradient Expenses M&O;: Maintenance and operating The company's interest rate (MARR) is 84%. (a) Calculate EUAW of Machine 1. (Answer Format: $xoxxx xx) 10 $2.220,0002,500,000 680,000 $82,000 $97,000 118,000 $524,000 $670,000 616,000 78,000 $15,000 $65,000 $11,000 $72,000 $12,500

Explanation / Answer

This is the one of the way and easiest way to calculate EUAW

Alternate solution:The benefit we get annually = 524000-65000-11000 = 448000 nothing but EUAB

EUAC = 2220000(A/P,8.4%,7 years) - 82000(A/F,8.4%,7)

=(2220000*0.084*1.0847))/(1.084)7-1) - 82000*0.084/(1.0847-1)

= (2220000*0.084*1.758754)/0.758754 - 82000*0.084/.758754

= 327972.4/0.758754 - 6888/0.758754

=432251.52 -9078.05

=423173.47

EUAW = EUAB - EUAC =448000-423173.47 =24826.53

Net cash flow = 524000-65000-11000 448000 Cash flow for 7th year = 448000+82000 530000 Calculation of Npv Year Cash flow Pvf@8.4 Disccf 1 448000 0.922509 413284.1 2 448000 0.851023 381258.4 3 448000 0.785077 351714.4 4 448000 0.724241 324459.8 5 448000 0.668119 299317.2 6 448000 0.616346 276122.8 7 530000 0.568585 301349.8 5.135899 2347507 Initial outlay 2220000 NPV 127506.5 EUAW 127506.5/5.135899 24826.53

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