contestada

Country Breads uses specialized ovens to bake its bread. One oven costs $249,000 and lasts about 15 years before it needs to be replaced. The annual operating cost per oven is $34,300. What is the equivalent annual cost of an oven if the required rate of return is 14 percent?

(A) -$74.839.43
(B) -$48,349.72
(C) -$82,800.19
(D) $50,560.08
(E) -$28,729.77

Respuesta :

lestat345

Answer:

The equivalent annual cost of an oven is [tex](A) -$74.839.43[/tex]

Explanation:

Hi

Known Data

Operating cost=[tex]OC=\$34,300[/tex],[tex]n=15, VP=\$249,000[/tex] and [tex]i=14\%[/tex]

Computing total cost per year

We are going to use the formula below with the known data.

[tex]A=\frac{VP}{\frac{1-(1+i)^{-n}}{i} } =\frac{249000}{\frac{1-(1+0.14)^{-15}}{0.14} }=40539.43[/tex]. Then this is the fixed amortization cost per year.

Finally, we sum the fixed amortization cost per year and the operating cost:

Total cost per year=[tex]TCPY=A+OC=\$40,539.43+\$34,300=\$74,839.43[/tex], therefore the answer is  [tex](A) -$74.839.43[/tex]