Question $1$

Peter is a salesman for Kroner industries which specializes in making of natural gas furnaces. Peter has

told you that your current furnace needs to be replaced and he offers the following choices. All furnaces

have a useful life of $20$ years.

Choice L $($Low efficiency furnace$)$

Initial cost is $$2,100$ including complete installation.

Heating cost is expected to be $$1,500$ and increasing at $4\mathrm{.}5\%$ every year.

Choice M $($Medium efficiency furnace$)$

Initial cost is $$2,500$ including complete installation.

Heating cost is expected to be $$1,300$ and increasing at $4\mathrm{.}5\%$ every year.

Choice H $($High efficiency furnace$)$

Initial cost is $$4,000$ including complete installation.

Heating cost is expected to be $$1,200$ and increasing at $4\mathrm{.}5\%$ every year.

Which furnace will you choose? Why? Use interest rate of $10\%$ Compounded Quarterly.

You mush show the work and relevant numbers in your computation to get the credit. Please also clearly state what formulas would be used