A Five-Year Project Has an Initial Fixed Asset Investment of $613,600

question 33

Multiple Choice

A five-year project has an initial fixed asset investment of $613,600, an initial net working capital investment of $22,200, and an annual operating cash flow of -$76,540. The fixed asset is fully depreciated over the life of the project and has no salvage value. The net working capital will be recovered when the project ends. The required return is 11.7 percent. What is the project's equivalent annual cost, or EAC?

• A) −$248,092.76
• B) −$182,309.18
• C) −$147,884.01
• D) −$235,490.58
• E) −$242,212.22

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Definitions:

FR(%)

A notation often representing failure rate percentage, signifying the likelihood of a component or system failing within a specific time period.

FR(N)

A notation often used in reliability engineering to refer to failure rate functions.

MTBF

Mean Time Between Failures, a reliability metric that denotes the average time between failures of a system or component.

Product Reliability

The likelihood that a product will not fail within a specific period under specified conditions.