Engineering Board Exam Reviewer · Present Worth Analysis · medium

A facility costs P80,000, must be replaced every 5 years with a salvage value of P10,000, and has annual costs of P6,000 forever. At 8% interest, find its capitalized cost.

  1. P155,000
  2. P374,149.40
  3. P166,931.95
  4. P304,149.40

Answer

D. P304,149.40

Solution

CC=C+(C-S)(A/F,i,n)/i+O/i=80,000+ 70,000(0.170456)0.08+ 6,0000.08=P304,149.40.

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