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BC Electronics is considering purchasing a water filtration system to assist in circuit board mamfacturing The system costs 540,000. It has an expected life of
BC Electronics is considering purchasing a water filtration system to assist in circuit board mamfacturing The system costs 540,000. It has an expected life of years and the salvage value will be $7,500. Operating and maintenance expenses are estimated to be 52.000 per year. If the filtration system is not purchased, Electronics will have to pay Bay City S12,000 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. BC Electronics must borrow half of the purchase price, and they will be able to repay the loan after 2 years. The bank has agreed to three equal omal payments, with the finit payment due at the end of year 2. The loan interest rate is 8 percent compounded annually, BC Electronics MARR is 10% per year (show your work in details) 1 Represent the cash flow diagrams for BC Electronics: investment versus service from Bay City 2 What is the amount of the annual payment to the bank? What is the present worth (PW) of the service option (Bay City) What is the present worth (PW) of the investment option? 5 Should BC Electronics buy the water filtration system? 3
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