Major overhaul expenses of $5,000 each are anticipated for a large piece of earthmoving equipment. The expenses will occur at EOY 4 and will continue every three years thereafter up to and including year 13. The interest rate on these expenses is 12% p.a. (Section 4.10)
a. Draw a cash-flow diagram.
b. What is the present equivalent of the overhaul expenses at time 0?
Possible Answers:
$ 5,195
$ 6,195
$ 7,195
$ 8,195
c. At the end of the period (13 years) how much will have been spent in total?