7. Your company purchased a milling machine for $80,000, which it intends to use for the next 5 years. This machine is expected to save $31,000 during the first operating year. Then the annual savings are expected to decrease by 4% each year due to increased maintenance costs. Assuming that your company would operate the machine for an average of 6,000 hours per year and that it would have no salvage value at the end of the 5-year period, determine the net annual equivalent savings per operating hour at 12% interest compounded annually. The net annual equivalent savings are $ per operating hour. (Round to two decimal places.)

7. Your company purchased a milling machine for $80,000, which it intends to use for the next 5 years. This machine is expected to save $31,000 during the first operating year. Then the annual savings are expected to decrease by 4% each year due to increased maintenance costs. Assuming that your company would operate the machine for an average of 6,000 hours per year and that it would have no salvage value at the end of the 5-year period, determine the net annual equivalent savings per operating hour at 12% interest compounded annually. The net annual equivalent savings are $ per operating hour. (Round to two decimal places.)

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 7PROB

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