A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000; maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $1,000 for each of the next 4 years, and then remain constant for the following 5 years; savings of $20,000 per year (EOY 1-10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm's MARR is 10% per year, what is the present worth of the project? is it a sound investment opportunity?
A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000; maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $1,000 for each of the next 4 years, and then remain constant for the following 5 years; savings of $20,000 per year (EOY 1-10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm's MARR is 10% per year, what is the present worth of the project? is it a sound investment opportunity?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...
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Transcribed Image Text:A project your firm is considering for implementation has these estimated costs
and revenues: an investment cost of $50,000; maintenance costs that start at
$5,000 at the end of year (EOY) 1 and increase by $1,000 for each of the next 4
years, and then remain constant for the following 5 years; savings of $20,000 per
year (EOY 1-10); and finally a resale value of $35,000 at the EOY 10. If the project
has a 10-year life and the firm's MARR is 10% per year, what is the present worth
of the project? is it a sound investment opportunity?
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