Answers
EUAC for 1 yr of operation = 50000*(A/P,12%,1) + 25000 - (50000-4000)*(A/F,12%,1)
= 50000*1.12 + 25000 - (50000-4000)
= 35000
EUAC for 2 yr of operation = 50000*(A/P,12%,2) + 25000 + 5000*(A/G,12%,2) - (50000-2*4000)*(A/F,12%,2)
= 50000*0.591698 + 25000 + 5000*0.471698 - (50000-2*4000)*0.471698
= 37132.08
EUAC for 3 yr of operation = 50000*(A/P,12%,3) + 25000 + 5000*(A/G,12%,3) - (50000-3*4000)*(A/F,12%,3)
= 50000*0.416349 + 25000 + 5000*0.924609 - (50000-3*4000)*0.296349
= 39179.23
EUAC for 4 yr of operation = 50000*(A/P,12%,4) + 25000 + 5000*(A/G,12%,4) - (50000-4*4000)*(A/F,12%,4)
= 50000*0.329234 + 25000 + 5000*1.358852 - (50000-4*4000)*0.209234
= 41142.01
EUAC for 5 yr of operation = 50000*(A/P,12%,5) + 25000 + 5000*(A/G,12%,5) - (50000-5*4000)*(A/F,12%,5)
= 50000*0.277410 + 25000 + 5000*1.774595 - (50000-5*4000)*0.157410
= 43021.17
As Annual cost of operation is minimum in 1 yr, ESL = 1 yr
First option is correct answer
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