What is the present worth of a new sander with an initial cost of $3,600 and an annual maintenance cost of $400?

To calculate the present worth of the new sander, we need to take into account both the initial cost and the annual maintenance costs. The initial cost of $3,600 is a cash outflow that occurs at the present time, thus it is already expressed in present worth terms. The annual maintenance cost of $400 needs to be considered over a certain period.

If we assume that the annual maintenance cost is to be considered over a specific time horizon, we can calculate its present worth using the formula for the present value of an annuity. This involves determining a discount rate and the number of years the maintenance will be incurred.

Let's denote:

• Initial cost = $3,600 (immediate cash outflow)

• Annual maintenance cost = $400 (recurring cash outflow)

• n = number of years (which needs specific context to determine)

Using the Present Value of an annuity formula, the present worth of the maintenance costs can be calculated. Assuming a time period of 10 years and a discount rate (for example, 10%), you would calculate the present worth of the maintenance:

[ \text{Present Worth of Maintenance} = C \times \left( \frac{1 - (1 + r)^{-