A 2-ton hydraulic press is needed to add to production. This equipment has an initial purchase and installation cost of $190,000. In addition, it has yearly operation costs of $1000 and maintenance costs of $1500. Each year we expect an additional $32,000 in revenue resulting from this purchase. The press is expected to have a salvage value of $20,000 at the end of its 10-year lifetime. Using an interest rate of 12%, what is the annual equivalent (AE) for the purchase of this equipment over its lifetime? If there is an annual loss enter the value as negative and if there is an annual profit enter the value as positive. (Chapter 6- Annual Equivalent Worth Analysis)

A 2-ton hydraulic press is needed to add to production. This equipment has an initial purchase and installation cost of $190,000. In addition, it has yearly operation costs of $1000 and maintenance costs of $1500. Each year we expect an additional $32,000 in revenue resulting from this purchase. The press is expected to have a salvage value of $20,000 at the end of its 10-year lifetime. Using an interest rate of 12%, what is the annual equivalent (AE) for the purchase of this equipment over its lifetime? If there is an annual loss enter the value as negative and if there is an annual profit enter the value as positive. (Chapter 6- Annual Equivalent Worth Analysis)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 18P

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