Question: Consider an asset which has no initial cost but for which there is an expenditure of $10,000 at the end of the first year. The

Consider an asset which has no initial cost but for which there is an expenditure of $10,000 at the end of the first year.

The net cost at the end of year 2 is $15,000.

The net cost at the end of year 3 is $20,000.

With an interest rate of 6%, what is a levelized cost payment payable at the end of years 1, 2, and 3 which has the same present value as the actual cost stream at the end of period 0.

The annuity factor with an interest rate of 6% and three payments is given by

(11(1+i)i)=(11(1.06)3.06)=2.673

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