Question
A facility planning engineer wants to analyze the economics of an 8-year project with the following information: 1- Installation cost, $250,000; 2- Maintenance per year,
A facility planning engineer wants to analyze the economics of an 8-year project with the following information: 1- Installation cost, $250,000; 2- Maintenance per year, $15,000, increasing at 5%/year; 3- Energy saving per year, $75,000, increasing at 8%/year; 4- Salvage value, $40,000, increasing at 6%/year; 5- Consumer Price Index (CPI) projected to increase at 6%/year. 6- The minimum attractive constant dollar rate of return for his company is set at 12%/year. 7- The corporate tax rate is 24%, 8- The equipment has a 7-year life for tax purposes.
(a) Find the equivalent constant dollar after-tax present worth. (b) Find the constant dollar, after-tax ROR or IRR for this project?
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