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A machine costs 50 000, has annual costs of 8000 and a salvage of 5000 after 10 years. At 10 per cent its equivalent uniform annual cost is about

  • A.8000
  • B.16 130
  • C.15 820
  • D.13 000

Answer: C

Correct answer: 15 820

\[ EUAC = 50{,}000(A/P, 10\%, 10) + 8{,}000 - 5{,}000(A/F, 10\%, 10) \] \[ = 50{,}000 \times 0.16275 + 8{,}000 - 5{,}000 \times 0.06275 = 8{,}138 + 8{,}000 - 314 = 15{,}824. \] Note the salvage enters through the sinking fund factor and reduces the annual cost, since it is a receipt at the end rather than a payment.

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