A small company heats its building and will spend $8,640in year 1 on natural gas for this purpose. Cost increases of natural gas are expected to be8%per year starting year 2. Their maintenance on the gas furnace is going to be$397.60in the first year and this expense is expected to increase by12%per year starting year 2. If the planning horizon is15 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 15%per year (a) The total present worth of operating and maintaining the furnace is $ (Round to nearest dollar) (b) The total annual equivalent expense for operating and maintaining the furnace is $ (Round to nearest dollar)
A small company heats its building and will spend $8,640in year 1 on natural gas for this purpose. Cost increases of natural gas are expected to be8%per year starting year 2. Their maintenance on the gas furnace is going to be$397.60in the first year and this expense is expected to increase by12%per year starting year 2. If the planning horizon is15 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 15%per year (a) The total present worth of operating and maintaining the furnace is $ (Round to nearest dollar) (b) The total annual equivalent expense for operating and maintaining the furnace is $ (Round to nearest dollar)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A small company heats its building and will spend $8,640in year 1 on natural gas for this purpose. Cost increases of natural gas are expected to be8%per year starting year 2. Their maintenance on the gas furnace is going to be$397.60in the first year and this expense is expected to increase by12%per year starting year 2. If the planning horizon is15 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 15%per year
(a) The total present worth of operating and maintaining the furnace is $
(Round to nearest dollar)
(Round to nearest dollar)
(b) The total annual equivalent expense for operating and maintaining the furnace is $
(Round to nearest dollar)
(Round to nearest dollar)
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