Economics

You are considering investing $65000 in new equipment. You estimate that the net cash flows will be $18000 during the first year, but will increase by $2500 per year the next yea and each year thereafter. The equipment is estimated to have a 10-year service and a net salvage value of $5000 at that time. Assume an interest rate of 9%.

i=9% per year

(a) Determine the annual capital cost (ownership cost for the equipment. (Round to the nearest dollar)

(b) Determine the equivalent annual savings (revenues)

(c) Determine whethher this is a wise investment. (Round to the nearest dollar.)

Single Payment Equal Payment Series Gradient Series

N Comp. Amt. Factor | PWF CAF | Sinking fund F. | PWF | Capital Rec. Fac | Gradient Uniform Series | Gradient Present Worth

(F/P,i, N) (P/F, i, N) (F/A, i, N) (A/F, i, N) (P/A, i, N) (A/P, i, N) (A/G, i, N) (P/ G, i, N)

1

.

9 2.1719 0.4604 13.0210 0.0768 5.9952 0.1668 3.4312 20.5700