Explore BrainMass

Explore BrainMass

    Equivalent Annual Cost and Minimum Attractive Rate of Return

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Compare the equivalent annual costs for 2 pumps. The minimum attractive rate of return is 12%.

    First cost of PUMP A is $8000
    First cost of PUMP B is $6000

    Salvage of PUMP A is zero
    Salvage of PUMP B is zero

    Life span of PUMP A is 8 years
    Life span of PUMP B is 8 years

    Annual repair costs of PUMP A is $500
    Annual repair costs of PUMP B is $800

    Annual operating costs of PUMP A is $1500
    Annual operating costs of PUMP B is $1800

    Use equivalent annual cost method.

    © BrainMass Inc. brainmass.com June 3, 2020, 10:25 pm ad1c9bdddf
    https://brainmass.com/business/equivalent-annual-annuity/equivalent-annual-cost-minimum-attractive-rate-return-230535

    Solution Preview

    Compare the equivalent annual costs for 2 pumps. The minimum attractive rate of return is 12%.

    First cost of PUMP A is $8000
    First cost of PUMP B is $6000

    Salvage of PUMP A is zero
    Salvage of PUMP B is zero

    Life span of PUMP A is 8 years
    Life span of PUMP B is 8 years

    Annual repair costs of PUMP A is $500
    Annual repair costs of PUMP B is $800

    Annual operating costs of PUMP A is $1500
    Annual operating costs of PUMP B is $1800

    Use equivalent annual cost method

    Answer:
    Note: To compare the two systems we calculate the ...

    Solution Summary

    The solution compares the equivalent annual costs for two pumps.

    $2.19

    ADVERTISEMENT