What Is the Equivalent Annual Cost for a Project That

question 107

Multiple Choice

What is the equivalent annual cost for a project that requires a $40,000 investment at time-period zero,and a $10,000 annual expense during each of the next 4 years,if the opportunity cost of capital is 10%?

• A) $20,000.00
• B) $21,356.95
• C) $22,618.83
• D)$25,237.66

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Definitions:

Market Price

The current price at which a good or service can be bought or sold in a market, determined by the forces of supply and demand.

Sacks

Bags made of various materials, typically used for storing or transporting items.

Profit Maximized

The point at which a firm's profit is at its highest because marginal cost equals marginal revenue.

Total Cost

The complete cost of production, including both fixed costs that do not change regardless of the output level and variable costs that increase or decrease with the level of production.