Question
A small company heats its building and spends $8 ,000 per year on natural gas for this purpose. Cost increases of natural gas are expected
A small company heats its building and spends $8,000 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 8% per year starting one year from now (i.e., the first cash flow is $8,640 at EOYone). Their maintenance on the gas furnace $355 per year, and this expense is expected to increase by 12% per year starting one year from now (i.e., the first cash flow for this expense is $397.60 at the EOY one). If the planning horizon is 14 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 18% per year.
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