Galvanized Products is considering purchasing a new computer system for their enterprise data management system. Thevendor has quoted a purchase price of $120,000. Galvanized Products is planning to borrow 1/4th of the purchase pricefrom a bank at 18.00% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period.The computer system is expected to last 5 years and has a salvage value of $5,000 at that time. Over the 5-year period,Galvanized Products expects to pay a technician $27,000 per year to maintain the system but will save $52,000 per yearthrough increased efficiencies. Galvanized Products uses a MARR of 20.00% / year to evaluateinvestments.a. What is the present worth of this investment?

1. Calculate the existing fee of the loan bills. The loan amount is 1/4th of the purchase charge, or…

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a. What is the present worth of this investment?

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

Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The
vendor has quoted a purchase price of $120,000. Galvanized Products is planning to borrow 1/4th of the purchase price
from a bank at 18.00% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period.
The computer system is expected to last 5 years and has a salvage value of $5,000 at that time. Over the 5-year period,
Galvanized Products expects to pay a technician $27,000 per year to maintain the system but will save $52,000 per year
through increased efficiencies. Galvanized Products uses a MARR of 20.00% / year to evaluate
investments.
a. What is the present worth of this investment?

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