Question
A company expects to install a control equipment. The local district has agreed to pay to the firm a lump sum of money to provide
A company expects to install a control equipment. The local district has agreed to pay to the firm a lump sum of money to provide for the first cost of the equipment and maintenance during its 10-year useful life. At the end of 10 years the equipment, which initially cost $10,000, has a salvage value of $2000. The company and the district have agreed that the maintenance costs is expected to be $100 at the end of the first year increasing wilt 4% for the next years. Assuming interest at 6% per year how much should the district pay to the company now to provide for the first cost of the equipment and its maintenance for 10 years?
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