Operating and repair costs for equipment will be $15,000 per year for a 3-year warranty period, which required an initial investment of $300,000. Beginning in year 4, costs will climb at a rate of $2,500 per year. The equipment will bring $55,000 in income to the business, but starting after year 2. The equipment will be retired after year 10, with a salvage value of $30,000. Find the present worth of these costs if the firm’s interest rate is 12%. What is the annual cost of ownership?
Operating and repair costs for equipment will be $15,000 per year for a 3-year warranty period, which required an initial investment of $300,000. Beginning in year 4, costs will climb at a rate of $2,500 per year. The equipment will bring $55,000 in income to the business, but starting after year 2. The equipment will be retired after year 10, with a salvage value of $30,000. Find the present worth of these costs if the firm’s interest rate is 12%. What is the annual cost of ownership?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Operating and repair costs for equipment will be $15,000 per year for a 3-year warranty period, which required an initial investment of $300,000. Beginning in year 4, costs will climb at a rate of $2,500 per year. The equipment will bring $55,000 in income to the business, but starting after year 2. The equipment will be retired after year 10, with a salvage value of $30,000. Find the present worth of these costs if the firm’s interest rate is 12%. What is the annual cost of ownership?
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