Chapter 5, Problem 67SE

A certain medical device will result in an estimated $15,000 reduction in hospital labor expenses during its first year of operation. Labor expenses (and thus savings) are projected to increase at a rate of 7% per year after the first year. Additional operating expenses for the device (maintenance, electric power, etc.) are $3,500 annually, and they increase by $250 per year thereafter (i.e., $3,750 in year two and so on). It is anticipated that the device will last for 10 years and will have no market value at that time. If the MARR is 10% per year, how much can the hospital afford to pay for this device? Use an Excel spreadsheet in your solution. (5.3)