A company is considering the purchase of Machine I or Machine II. The following data may apply:

Machine I Machine II

First Cost $80,000 $100,000

Estimated Life 20 yr. 25 yr.

Salvage Value $20,000 $25,000

Other costs including: taxes, $18,000 per yr. $ 15,000 per yr. first 15 yr.

Insurance, and operation $ 20,000 per yr. next 10 yr.

The interest rate is 10% per annum, and all cash flows may be treated as end-of-years cash flows. Assume that equivalent annual cost is the value of the level annuity equal to the total cost of a project.

1) If Machine II is purchased, the equivalent annual cost is most nearly:

2)The present worth of the costs of using Machine II for 25 years is most nearly:

3) If funds equal to the present worth of the costs for purchasing and using Machine I over the 20-year period were placed in a bank at 10% annual interest, compounded annually, how much would the fund total at the end of the 20-year period?