Suppose that the following most favorable estimates apply to the equipment in Problem 1.

[Note. Assume the analysis is performed before taxes.]

Additional tonnage handled:

Income per ton:

Service life in years:

Annual maintenance and operation costs:

5,500 $ 11 12 $12,000

Compute the project's Annual Equivalent (AE) for this most favorable estimate. What would you recommend to the firm? Answer : AE(12%) = $43,656.95. Accept the project.