A plant manager wants to know the present worth of the maintenance costs for a reconditioned assembly line. An industrial engineer, who designed the system, estimates that the maintenance costs are expected to be zero for the first three years, $2000 in year four, and the amounts increasing by $500 each year thereafter through year 10 (i.e., $2500 in year five, $3000 in year six, and so on). At an interest rate of 8% per year compounded semiannually, the values of and n to use in the P/G equation are: 4% and 14 8.16% and 7 8.16% and 14 8% and 7

A plant manager wants to know the present worth of the maintenance costs for a reconditioned assembly line. An industrial engineer, who designed the system, estimates that the maintenance costs are expected to be zero for the first three years, $2000 in year four, and the amounts increasing by $500 each year thereafter through year 10 (i.e., $2500 in year five, $3000 in year six, and so on). At an interest rate of 8% per year compounded semiannually, the values of and n to use in the P/G equation are: 4% and 14 8.16% and 7 8.16% and 14 8% and 7

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A plant manager wants to know the present worth of the maintenance costs for a reconditioned
assembly line. An industrial engineer, who designed the system, estimates that the maintenance
costs are expected to be zero for the first three years, $2000 in year four, and the amounts
increasing by $500 each year thereafter through year 10 (i.e., $2500 in year five, $3000 in year
six, and so on). At an interest rate of 8% per year compounded semiannually, the values of and n
to use in the P/G equation are:
4% and 14
8.16% and 7
8.16% and 14
8% and 7

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