An engineering company is working in coal mining operation has installed an in-s
ID: 1194739 • Letter: A
Question
An engineering company is working in coal mining operation has installed an in-shaft monitoring system for oxygen tank and gear readiness for emergencies. Based on maintenance patterns for previous systems, costs are minimal for the first few years, increase for a time period, and then level off. Maintenance costs are expected to be $180,000 in year 3, and increase by 6% per year through year 6 and remain constant thereafter for the expected 10-year life of this system. If similar systems will replace the current one, determine the perpetual equivalent annual maintenance cost at i =10% per year.
Explanation / Answer
Calculate the present value of the maintenance cost.
P = 180000(P/A,10%,3) + 190800(P/F,10%,4) + 202248(P/F,10%,5) + 214382.88(P/A,10%,5)(P/F,10%,5)
P = 180000(2.487) + 190800(0.6830) + 202248(0.6209) + 214382.88(3.791)(0.6209)
P = $1,208,173.44
Calculate equivalent uniform annual maintenance cost.
EUAC = $1,208,173.44 (A/P, 10%, 10) = $1,208,173.44 (0.1627) = $196,569.82