An engineer determined the ESL of a new $80,000 piece of equipment and recorded the calculations shown below. [Note that the numbers are annual worth values associated with various years of retention; that is, if the equipment is kept for, say, 3 years, the AW (years 1 through 3) of the first cost is $32,169, the AW of the operating cost is $51,000, and the AW of the salvage value is $6042.] The engineer forgot to enter the AW of the salvage value for 2 years of retention. From the information available, determine the following:

(a) The interest rate used in the ESL calculations.

(b) The salvage value after 2 years, if the total AW of the equipment in year 2 was $78,762. Use the interest rate determined in part(a).

Transcribed Image Text:

Years Retained AW of First Cost, $ -88,000 -46,095 -32,169 AW of Operating Cost, S AW of -45,000 -46,000 -51,000 Salvage Value, $ 50,000 6,042