Discounted lifecycle costing  help please
Options
flower
Registered Posts: 160 Dedicated contributor 🦉
Question 2.3 a on DEC 08 PEV. Can anyone explain where the £20,000 comes from in year 5.
It states residual value of £50,000 at end of 5 years.
It states residual value of £50,000 at end of 5 years.
0
Comments

You're trying to work out the Net present cost in this question and not value, so the costs will be in positive figures and any revenue in negatives. So it says the machine last for 5 years and you are given the discounted rates.
Year 0 the machine shows a purchase price of 300,000.
It then says for the next 5 years the annual costs are 30,000 and in year five there is a residual value of 50,000
So year 1  30,000
year 2  30,000
year 3  30,000
year 4  30,000
year 5  this is the final annual cost of 30k but you are getting a residual value of 50k, so you have made 20k (5030) in year five and this is shown as a negative figure because this 'profit' can be taken off the costs incurred in the first 4 years0
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 12.4K For AAT students
 278 NEW! Qualifications 2022
 148 General Qualifications 2022 discussion
 9 AAT Level 2 Certificate in Accounting
 50 AAT Level 3 Diploma in Accounting
 70 AAT Level 4 Diploma in Professional Accounting
 8.8K For accounting professionals
 23 coronavirus (Covid19)
 270 VAT
 91 Software
 271 Tax
 134 Bookkeeping
 7.1K General accounting discussion
 198 AAT member discussion
 3.8K For everyone
 38 AAT news and announcements
 345 Feedback for AAT
 2.8K Chat and offtopic discussion
 580 Job postings
 16 Who can benefit from AAT?
 36 Where can AAT take me?
 42 Getting started with AAT
 26 Finding an AAT training provider
 48 Distance learning and other ways to study AAT
 25 Apprenticeships
 66 AAT membership