Engineering Economic Analysis

Annual CashFlow Calculations 179

The student in Example 6-1 now believes the furniture can be sold at the end of 10 years for $200.

Under these circumstances, what is the equivalent uniform annual cost?

Resale Value

8=200

t

0-1-2-3-4-5-6-7-8-9 ,10

1 i i i i i i i i i i

P= 1000

For this situation, the problem may be solved by means of three different calculations.

EUAC= P(AI P, i, n)- S(AIF, i, n)

= 1000(A I P,7%, 1O).~200(AIF, 7%, 10)

• 1000(0.1424)- 200(0.0724)

=142.40 - 14.48=$127.92 (6-1)

This method reflects the annual cost of the cash disbursement minus the annual benefit of the

future resale value.

EquatiOIl 6-1 describes a relationship that maybe modified by an identity presented ill Chaptet:,4:

(AI p, i, n). (AI F, i, n)+i

Substituting this into Equation 6-1 gives:

i I I J i I ~

.~ s method c()mputes.'th.e"equiyalel).tarmui.lIc?s~et()the(utIrecQyete~US~O(}when~the"furnitty"e~=.J

IS sold, and adds annual mtereston the $1000 mveStinent ]

~iiA ~=-W:;;;::~J1'-4>.."'..:..: .: ,'-',,~...; .. __ 'UMtltJ ..r LV "~.,:;;;:-~~c.ooF -AII

EUAC=P(AI F, t, n)+'Pi=-SCAlF, t, n)

= (P'-" S)(AIF, i.,it)-+Pi.

=(1000-2(0)(AIF, 7%, 10) +1000(0.07)

,. .800(0.0724) +70 57.92+70

= ~~ ~ ~ ;;;;:::: ~ ;;;;~ =;'1~~ ~ :-.:

. '. $127.92 (6-3)