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Steps on Calculating Uniform Annual Cost

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An alternative has a discounted project cost of $12,345,000 with a discounted salvage value of $1,750,000. The estimate was in constant dollars and the discounting used end-of-year factors. While the period of analysis is 5 years, the alternative only provides benefits for the last 4 years. Calculate the uniform annual cost.

A) $2,896,471
B) $2,282,735
C) $2,891,003
D) $2,854,251

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Solution Preview

Step 1. First we need check the factors table in the textbook with 5 year project.

5 Year Project
End-Year Factors
Project Constant Dollars Current ...

Solution Summary

The solution gives detailed steps on calculating uniform annual cost using constant dollars and end-of-year factors.

See Also This Related BrainMass Solution

Calculating Equivalent Uniform Annual Cost: Example Problem

Please see the attached file.

Your County is planning to build a park. The initial cost for the park will amount to $6,500,000. Annual maintenance and repairs will amount to:

$25,000 for each of the first five years,

$30,000 for each of the next ten years and,

$35,000 for each of the next five years.

In addition, a major overhaul costing $500,000 will be required at the end of the tenth year.

a) Use a constant interest rate of 5% and determine the equivalent uniform annual cost for a 20-year period.

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