Chapter 5, Problem 20P

Your firm is thinking about investing $200,000in the overhaul of a manufacturing cell in a lean environment. Revenues are expected to be $30,000 in year one and then increasing by $10,000 more each year thereafter. Relevant expenses will be $10,000 in year one and will increase by $5,000 per year until the end of the cell’s seven-year life. Salvage recovery at the end of year seven is estimated to be $8,000. What is the annual equivalent worth of the manufacturing cell if the MARR is 10% per year? (5.5)