Engineering Board Exam Reviewer · Present Worth Analysis · medium
Machine A costs P90,000, lasts 3 years with no salvage value, and has annual costs of P10,000. To compare it with a 6-year alternative, assume it is replaced by an identical machine after 3 years. Find the present worth of cost of A over 6 years at 10%.
- P133,552.61
- P223,552.61
- P201,170.94
- P157,618.33
Answer
C. P201,170.94
Solution
Cash flows over 6 years: 90,000 now, a replacement of 90,000 at year 3, and 10,000 per year. PW=90,000+90,000(P/F,10%,3)+10,000(P/A,10%,6)=90,000+67,618.33+43,552.61=P201,170.94.
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