D8=1

Question 4 [Total 15 marks] A grinding machine made by ABC Grinding Company is getting very old and requires major overhaul now in order to keep it running properly. The overhaul expenses are $(100,000 +D81,000 ). Major overhauls are expected to continue to occur every 3 years thereafter up to and including Year 9 if we want to keep the machine working properly. After the last overhaul, the machine will immediately be resold for $(150,000+D81,000). Assume the overhaul expenses will remain the same and the discount rate is 5% per year. (a) Draw a cash flow diagram illustrating the above situation using the convention mentioned in Lecture 3. (4 marks) (b) What is the equivalent net present worth (PW) of the cashflows as of today? Round off your final answer to the nearest hundred. (5 marks) (c) What is the equivalent net future worth (FW) of the cashflows at EOY 9? Round off your final answer to the nearest hundred. (3 marks) (d) What is the equivalent net annual worth (AW) of the cashflows from EOY 1 to EOY 9? Round off your final answer to the nearest hundred. ( 3 marks)