Calculate the equivalent annual cost for four-year project

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Two costs of construction of a small, remote mine are for labor and transportation. Labor costs are expected to be $120,000 the first year, with inflation of 6% annually for 4 years. Unit transportation costs are expected to inflate at 5% annually, but the volume of material of material being moved changes each year. In today’s dollars, the transportation costs are estimated to be $40,000, $60,000, $50,000, and $30,000 in years 1 through 4. The inflation rate for the value of the dollar is 3%. If the firm uses inflation free MARR of 7%, calculate the equivalent annual cost for this 4-year project.

Reference no: EM13943085

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