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A firm that purchases electricity from the local utility for $250,000 per year is considering installing a steam generator at a cost of $340,000 the
A firm that purchases electricity from the local utility for $250,000 per year is considering installing a steam generator at a cost of $340,000 the cost of operating this generator would be $180,000 per year and the generator will last for five years if the firm buys the generator it does not need to purchase any electricity from the local utility the cost of capital is 10%.
for the local utility option consider five years of electricity purchases . for the generator option assume immediate installation with purchase and operating costs in the current year and operating costs continuing for the next four years. assume payments under both options at the start of each year .
what is the net present value of the more attractive choice?
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