Purchase Solution

Calculating the Annual Equivalence

Not what you're looking for?

Ask Custom Question

An automated MIG welder is needed to add to production. This equipment has an initial purchase and installation cost of $3200. In addition, it has yearly operation costs of $200 and maintenance costs of $50.

Each year we expect an additional $1,000 in revenue resulting from this purchase. It is expected to have a salvage value of $150 at the end of its 8-year lifetime. Using an interest rate of 12%, what is the annual equivalent (AE) for the purchase of this equipment over its lifetime?

Purchase this Solution

Solution Summary

Solution depicts the steps to calculate the equivalent annual worth of the given equipment.

Solution Preview

Please refer to the attached file for the formatted solution.

In this case,
Purchase and installation cost=C=$3200
O&M cost per year=M=200+50=$250 per year
Annual ...

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.