Question
A small company heats its building and spends $7,800 per year on natural gas for this purpose. Cost increases of natural gas are expected to
A small company heats its building and spends $7,800 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 10% per year starting one year from now (i.e., the first cash flow is $8580 at EOY one). Their maintenance on the gas furnace is $350 per year, and this expense is expected to increase by 15% per year starting one year from now (i.e., the first cash flow for this expense is $402.50 at the EOY one). If the planning horizon is 15 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 18% per year. The total annual equivalent expense for operating and maintaining the furnace is $ ? thousands. (Round to two decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started