Construction Materials & Procedures

A copier machine will be purchased at the beginning of January 2021 for a new project that has been awarded to your firm. Maintenance on this machine will be $100 at the end of the first year but is expected to increase by $25 each year thereafter. What is the present worth of five years of the cost of maintenance? Use an interest rate of 12%. What is the present worth (PW) of the electric power option, assuming an interest rate of 12%? Please note that equipment in the electric power plant will need to be replaced only in the 3rd year. Electric Power Gas Power Construction Cost (initial cost) $2500 $3500 6 years (structure) Life 6 years 3 years (equipment) Cost of replacing equipment at the end of 3 years $1000 0 Operating cost $900/year $700/year Salvage Value $350 $200