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? The lump-sum equivalent cost of this project at the present time equals $

Explanation / Answer

Year Cash Out flow 18 % Discount Discounted Cash flow 0 88000 1.0000 88000.00 1 11000 0.8475 9322.03 2 11000 0.7182 7900.03 3 11000 0.6086 6694.94 4 11000 0.5158 5673.68 5 35000 0.4371 15298.82 6 11000 0.3704 4074.75 7 11000 0.3139 3453.18 8 11000 0.2660 2926.42 Present worth 143343.84 Assuming No Annual Cost incured on 5 th year

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