Nelson, Inc. is considering investing in new and more efficient equipment The equipment has 10-year life with the first cost of $800,000. The annual operating cost is $40,000 in year one and increases by $20,000 per year. The salvage value expected to be $50,000 and Nelson's MARR is 10%.

Nelson, Inc. is considering investing in new and more efficient equipment The equipment has 10-year life with the first cost of $800,000. The annual operating cost is $40,000 in year one and increases by $20,000 per year. The salvage value expected to be $50,000 and Nelson's MARR is 10%.

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

Nelson, Inc. is considering investing in new and more efficient equipment The
equipment has 10-year life with the first cost of $800,000. The annual operating
cost is $40.000 in year one and increases by $20,000 per year. The salvage value
expected to be $50,000 and Nelson's MARR is 10%.
a Calculate the capital recovery (CR) of nonrecurring cash flows.
b. Calculate the annual worth (AW) of this equipment.

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