Your firm is considering the purchase of a $150K very sophisticated surveying system. You would purchase it (no down payment) with a 5-year loan at 6% annual interest. This is a major investment, so you want to analyze the potential benefit to cost ratio. You believe that this new piece of equipment will net 1000 new hours of work for your firm annually. The equipment as provided to a customer always has a technician/ surveyor that comes with it. The firm charges $500 per hour when the system goes to a job site. You may assume that the net benefit to the firm is $400 per hour, after the overhead cost of the system is removed. Note: the loan is not factored into the net benefit, so that is an additional cost. See below. Show your work! Determine the annual cost of the loan for the piece of equipment (for the first 5 years). Find A, given P, i = 6%, n = 5 years A= _________

Determine the annual benefit and the annual cost of the piece of equipment.

Determine the benefit to cost (B/C) ratio. SHOW YOUR WORK!

Should you consider purchasing this new piece of equipment?