Question

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

Verified
Step 1
1 of 2

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

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

A=26,000+1,500×(A/G,8%,5)=26,000+1,500×(1.8465)=$28,769.75\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*}

Create a free account to view solutions

Create a free account to view solutions

Recommended textbook solutions

Engineering Economy 7th Edition by Patricia Duffy, Ronald Kay, William Edwards

Engineering Economy

7th EditionISBN: 9780071086097Patricia Duffy, Ronald Kay, William Edwards
1,116 solutions
Engineering Economy 7th Edition by Anthony Tarquin, Leland Blank

Engineering Economy

7th EditionISBN: 9780073376301Anthony Tarquin, Leland Blank
1,116 solutions
Engineering Economy 8th Edition by Anthony Tarquin, Leland Blank

Engineering Economy

8th EditionISBN: 9780073523439Anthony Tarquin, Leland Blank
1,233 solutions
Contemporary Engineering Economics 6th Edition by Chan S. Park

Contemporary Engineering Economics

6th EditionISBN: 9780134123929 (4 more)Chan S. Park
302 solutions

More related questions

1/4

1/7