Question
A maintenance company is offering a firm tow payments plans, A and B for a machine, in plan A duration four years, firm has to pay annual uniform payment of $ 480. In plan B duration five years, firm has to pay monthly uniform payments of $ 50. the normal interest rate is 6% compounded Annually for plan A and for plan B. Using AQ method, which plan would you recommend? A given business has a useful life of 4 years. the market value at the end of the fourth year is $4000. It the MARR is 12% and estimated cash flow data s follow; a- calculate the Capital Recovery b-using AQ method, calculate the x value at the end of year 4
Explanation / Answer
1)use pv formulae ine excel to find the present value of each payment
pv(eate,nper,pmt,fv,type)
plan A:
Here rate=6% nper=4 pmt=480
=PV(6%,4,-480,,0)=$1663.25
plan B:
hre it is monthly so rate =6%/12 nper=5*12(monthly) pmt=50
=PV(6%/12,5*12,-50,,0)=$2586.28
Plan A is better since we are paying less there