Find the present worth of earthmoving equipment that has a first cost today of $150,000, an annual

Question:

Find the present worth of earthmoving equipment that has a first cost today of $150,000, an annual operating cost of $60,000, and a salvage value of 20% of the first cost after 5 years; these estimates being in future dollars. Assume the interest rate is 10% per year and that inflation has averaged 7% per year. Solve by hand and spreadsheet with inflation

(a) Not accounted for, and

(b) Accounted for.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

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