value is $12,000. The annual insurance cost is 5% of the purchase price. The electricity co is $ 800 per year and maintenance and replacement parts cost is $1200 per year. T effective annual interest rate is 10% per year. What is the Present worth of the equipment it is expected to save the company $15,000 per year?
value is $12,000. The annual insurance cost is 5% of the purchase price. The electricity co is $ 800 per year and maintenance and replacement parts cost is $1200 per year. T effective annual interest rate is 10% per year. What is the Present worth of the equipment it is expected to save the company $15,000 per year?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section: Chapter Questions
Problem 3CQQ
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Please answer question 5 with details on how to do it. Thank you.
Transcribed Image Text:5. A company purchases manufacturing equipment for $ 100,000. After 10 years, the salvage
value is $12,000. The annual insurance cost is 5% of the purchase price. The electricity cost
is $ 800 per year and maintenance and replacement parts cost is $1200 per year. The
effective annual interest rate is 10% per year. What is the Present worth of the equipment if
it is expected to save the company $15,000 per year?
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