A small company heats its building and will spend $9,900 in year 1 on natural gas for this purpose. Cost increases of natural gas are expected to be 10% per year starting year 2. Their maintenance on the gas furnace is going to be $385.25 in the first year and this expense is expected to increase by 15% per year starting year 2. If the planning horizon is 13 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 20% 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 $9,900 in year 1 on natural gas for this purpose. Cost increases of natural gas are expected to be 10% per year starting year 2. Their maintenance on the gas furnace is going to be $385.25 in the first year and this expense is expected to increase by 15% per year starting year 2. If the planning horizon is 13 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 20% 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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Transcribed Image Text:A small company heats its building and will spend $9,900 in year 1 on natural gas for this purpose. Cost increases of
natural gas are expected to be 10% per year starting year 2. Their maintenance on the gas furnace is going to be
$385.25 in the first year and this expense is expected to increase by 15% per year starting year 2. If the planning
horizon is 13 years, what is the total annual equivalent expense for operating and maintaining the furnace? The
interest rate is 20% 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)
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