## Related questions with answers

The Gap has some of its jeans stone-washed under a contract with Vietnam Garment Corporation (VGC). If VGC’s estimated operating cost per machine is $26,000 for year 1 and it increases by$1500 per year through year 5, the equivalent uniform annual cost per machine over years 1 to 5, at an interest rate of 8% per year, is closest to: (a) $30,850 (b)$28,770 (c) $26,930 (d)$23,670

Solution

VerifiedWe need to take a look at the $\textbf{Table 13}$, $\textbf{Discrete Cash Flow: Compound Interest Factor.}$

From the mentioned table, we should take the $\textbf{Gradient Uniform Series: A/G}$ for $\textbf{8\%}$ and $\textbf{n=5}$.

$\begin{align*} \text{A} &=26{,}000+1{,}500\times(A/G, 8\%, 5)\\[7pt] &= 26{,}000+1{,}500\times(1.8465)\\[7pt] &= \boxed{\$28{,}769.75}\\ \end{align*}$

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