## Answers

Using Excel for Economic life analysis

Year | Discount factor | O&M cost | PV (O&M) | Cumulative (O&M) | Cumulative (O&M) + Initial Cost | Salvage value | PV (Salvage value) | NPV | (A/P,15%,n) | EUAC |

A | B | C | D=C*B | E | F=E+9000 | G | H=G*B | I=F-H | J | K = I*J |

1 | 0.86957 | 8600.00 | 7478.26 | 7478.26 | 16478.26 | 6000.00 | 5217.39 | 11260.87 | 1.15000 | 12950 |

2 | 0.75614 | 9600.00 | 7258.98 | 14737.24 | 23737.24 | 4500.00 | 3402.65 | 20334.59 | 0.61512 | 12508 |

3 | 0.65752 | 10600.00 | 6969.67 | 21706.91 | 30706.91 | 3375.00 | 2219.12 | 28487.79 | 0.43798 | 12477 |

4 | 0.57175 | 11600.00 | 6632.34 | 28339.25 | 37339.25 | 2531.25 | 1447.25 | 35892.00 | 0.35027 | 12572 |

5 | 0.49718 | 12600.00 | 6264.43 | 34603.68 | 43603.68 | 1898.44 | 943.86 | 42659.82 | 0.29832 | 12726 |

6 | 0.43233 | 13600.00 | 5879.66 | 40483.33 | 49483.33 | 1423.83 | 615.56 | 48867.77 | 0.26424 | 12913 |

7 | 0.37594 | 14600.00 | 5488.68 | 45972.01 | 54972.01 | 1067.87 | 401.45 | 54570.56 | 0.24036 | 13117 |

Discount factor | 1/(1+0.15)^n | |||||||||

(A/P,i,n) | i((1 + i)^n)/((1 + i)^n-1) |

**As Minimum EUAC = 12477, Economic life is 3 yrs**

**it lies between 12458 - 12498**

**option B is the correct answer**

Showing formula in Excel

Year | Discount factor | O&M cost | PV (O&M) | Cumulative (O&M) | Cumulative (O&M) + Initial Cost | Salvage value | PV (Salvage value) | NPV | (A/P,15%,n) | EUAC |

A | B | C | D=C*B | E | F=E+9000 | G | H=G*B | I=F-H | J | K = I*J |

1 | =1/(1.15)^A127 | 8600 | =C127*B127 | =D127 | =9000+E127 | =8000*0.75 | =G127*B127 | =F127-H127 | =0.15*((1 + 0.15)^A127)/((1 + 0.15)^A127-1) | =I127*J127 |

2 | =1/(1.15)^A128 | =C127+1000 | =C128*B128 | =E127+D128 | =9000+E128 | =G127*0.75 | =G128*B128 | =F128-H128 | =0.15*((1 + 0.15)^A128)/((1 + 0.15)^A128-1) | =I128*J128 |

3 | =1/(1.15)^A129 | =C128+1000 | =C129*B129 | =E128+D129 | =9000+E129 | =G128*0.75 | =G129*B129 | =F129-H129 | =0.15*((1 + 0.15)^A129)/((1 + 0.15)^A129-1) | =I129*J129 |

4 | =1/(1.15)^A130 | =C129+1000 | =C130*B130 | =E129+D130 | =9000+E130 | =G129*0.75 | =G130*B130 | =F130-H130 | =0.15*((1 + 0.15)^A130)/((1 + 0.15)^A130-1) | =I130*J130 |

5 | =1/(1.15)^A131 | =C130+1000 | =C131*B131 | =E130+D131 | =9000+E131 | =G130*0.75 | =G131*B131 | =F131-H131 | =0.15*((1 + 0.15)^A131)/((1 + 0.15)^A131-1) | =I131*J131 |

6 | =1/(1.15)^A132 | =C131+1000 | =C132*B132 | =E131+D132 | =9000+E132 | =G131*0.75 | =G132*B132 | =F132-H132 | =0.15*((1 + 0.15)^A132)/((1 + 0.15)^A132-1) | =I132*J132 |

7 | =1/(1.15)^A133 | =C132+1000 | =C133*B133 | =E132+D133 | =9000+E133 | =G132*0.75 | =G133*B133 | =F133-H133 | =0.15*((1 + 0.15)^A133)/((1 + 0.15)^A133-1) | =I133*J133 |

Discount factor | 1/(1+0.15)^n | |||||||||

(A/P,i,n) | i((1 + i)^n)/((1 + i)^n-1) |

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