Instructions

Draw Cash flow diagrams

Set up and solve problem in Excel

A new product design requires an initial tooling spend/outlay of $5000 initially, another $2000 at the end of the first year, $4000 at the end of the second year, and $4000 at the end of the 5th year. The Rate is 10%

a) How much would have to be set aside initially (today-time zero) to fund this project?

b) What would be the equivalent annual cost if the project lasts for 10 years?