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What is the NPV and IRR of the investment of the furnace? A new furnace for your small factory will cost $27,000 to install. The
What is the NPV and IRR of the investment of the furnace?
A new furnace for your small factory will cost $27,000 to install. The furnace will also require ongoing maintenance expenditures of $1,500 a year. However, the furnace is far more fuel-efficient than your old furnace and will reduce your consumption of heating oil by 2,400 gallons per year. Heating oil this year will cost $3 a gallon; the price per gallon is expected to increase by $.50 a year for the next 3 years and then to stabilize for the foreseeable future. The furnace wil last for 20 years, at which point it will need to be replaced. You plan on installing the furnace at the end of this year. The discount rate is 8%Step by Step Solution
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