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Merry Industries is considering a new piece of equipment for a project lasting 10 years with details as shown below. The costs and benefits are
Merry Industries is considering a new piece of equipment for a project lasting 10 years with details as shown below. The costs and benefits are expected to keep increasing with the inflation rate even when a new machine is put into operation. Taking these into account, what is the annual worth that the company can expect from the machine?
Initial cost | $65,000 | |
MARR | 12% | p y c y |
Inflation rate | 3% | p y c y |
Life | 7 | years |
Project life | 10 | years |
Machine value today with life of 3 years | $24,500 | |
Machine value today with life of 7 years | $13,500 | |
First year costs | $7,200 | |
First year benefits | $25,800 |
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