Ronald McDonald decides to install a fuel storage system for his farm that will save him an estimated 6.5 cents/gallon on his fuel cost. He uses an estimated 20,000 gallons/year on his farm. Initial cost of the system is $10,000, and the annual maintenance the first year is $25, increasing by $25 each year thereafter. After a period of 10 years the estimated salvage is $3000. If money is worth 12%, is the new system a wise investment?
Ronald McDonald decides to install a fuel storage system for his farm that will save him an estimated 6.5 cents/gallon on his fuel cost. He uses an estimated 20,000 gallons/year on his farm. Initial cost of the system is $10,000, and the annual maintenance the first year is $25, increasing by $25 each year thereafter. After a period of 10 years the estimated salvage is $3000. If money is worth 12%, is the new system a wise investment?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Ronald McDonald decides to install a fuel storage system for his farm that will save him an estimated 6.5 cents/gallon on his fuel cost. He uses an estimated 20,000 gallons/year on his farm. Initial cost of the system is $10,000, and the annual maintenance the first year is $25, increasing by $25 each year thereafter. After a period of 10 years the estimated salvage is $3000. If money is worth 12%, is the new system a wise investment?
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