A customer is going to buy a brand new pump and motor. It has an initial cost of $10,000. The lifetime of the pump is fifteen years and is estimated to save about $1,000 per year. There is also an additional cost of maintenance at $300 per year with the pump. At the end of its lifetime, the pump will have a salvage value of $0. The interest rate is at 4%. Find the annual value of the pump and what is the salvage value for the pump in order to break even?
A customer is going to buy a brand new pump and motor. It has an initial cost of $10,000. The lifetime of the pump is fifteen years and is estimated to save about $1,000 per year. There is also an additional cost of maintenance at $300 per year with the pump. At the end of its lifetime, the pump will have a salvage value of $0. The interest rate is at 4%. Find the annual value of the pump and what is the salvage value for the pump in order to break even?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A customer is going to buy a brand new pump and motor. It has an initial cost of $10,000. The lifetime of the pump is fifteen years and is estimated to save about $1,000 per year. There is also an additional cost of maintenance at $300 per year with the pump. At the end of its lifetime, the pump will have a salvage value of $0. The interest rate is at 4%. Find the annual value of the pump and what is the salvage value for the pump in order to break even?
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