Crater Lake Diagnostics Inc is considering the purchase of a new piece

Crater Lake Diagnostics Inc is considering the purchase of a new piece of equipment that has an initial investment of $75,000, has annual expenses associated with its operation of $10,000 per year and has a six year life.

What is the equivalent annual cost of this investment if the firms considers the appropriate discount rate to be 11%?
A) $17,728
B) $19,551
C) $22,500
D) $27,728

ANSWER

D
Explanation: A) .
D) Via Calculator: N = 6, I = 11, PV = -75,000, FV = 0, PMT = $17,728 + $10,000 = $27, 728.