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A Machine Lasts 3 Years and Has a Purchase Price

question 2

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A machine lasts 3 years and has a purchase price of $100. It costs $40 per year to operate and can be sold as junk for $15 at the end of its life. What is the EAC of the costs of operating a series of such machines into perpetuity if the discount rate is 15%?
A.15,3 -15/(1.15)3 = $181.47
The machine's equivalent annual cost is: $181.47/2.283 = $79.48


Definitions:

Nominal Data

Data classified into categories that cannot be ordered or ranked, used for labeling variables without a quantitative value.

Frequency

The number of times an event or value occurs in a dataset, often represented in a frequency distribution table or histogram.

Proportion

A mathematical ratio indicating the relationship in quantity, amount, or size between parts of a whole.

Nominal

Pertaining to data that can be categorized but not ranked or ordered; involves naming or labeling attributes.

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