Replacing old equipment at an immediate cost of $75000 and an additional outlay of $10000 six years from now will result
in savings of $3120 per quarter for 11years. The required rate of return is 11.4% compounded annually.
Compute the Present Value of each alternative and determine the perferred alternative according to the discounted cash flow criterion.
75000(1-1.114^-6/.114)(1.114^-3)
75000(3.589696875)(.723343241) = 194743.7145
10000(1-1.114^-6/.114)-3120(1.114)^-11
10000((3.589696875)(.304974060)=10947.64430
194743.7145 - 10947.64430 =183796.0702
Does this seam right?
in savings of $3120 per quarter for 11years. The required rate of return is 11.4% compounded annually.
Compute the Present Value of each alternative and determine the perferred alternative according to the discounted cash flow criterion.
75000(1-1.114^-6/.114)(1.114^-3)
75000(3.589696875)(.723343241) = 194743.7145
10000(1-1.114^-6/.114)-3120(1.114)^-11
10000((3.589696875)(.304974060)=10947.64430
194743.7145 - 10947.64430 =183796.0702
Does this seam right?