Consider a new machine at a bottling plant that has a first cost of $100000, operating and maintenance costs of $16000 per year, and an estimated net salvage value of $18000 at the end of 30 years. Assume an interest rate of 7%. What is the present equivalent cost of the investment if the planning horizon is 30 years?
Consider a new machine at a bottling plant that has a first cost of $100000, operating and maintenance costs of $16000 per year, and an estimated net salvage value of $18000 at the end of 30 years. Assume an interest rate of 7%. What is the present equivalent cost of the investment if the planning horizon is 30 years?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter14: Real Options
Section: Chapter Questions
Problem 4MC
Question
![Consider a new machine at a bottling plant that has a first cost of $100000, operating and maintenance
costs of $16000 per year, and an estimated net salvage value of $18000 at the end of 30 years. Assume an
interest rate of 7%. What is the present equivalent cost of the investment if the planning horizon is 30
years?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdbb8af0c-abe4-42e5-b157-c6f61886cbce%2F03e0b923-2fe5-423a-a330-a196bdfe40f0%2F02kgxs_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a new machine at a bottling plant that has a first cost of $100000, operating and maintenance
costs of $16000 per year, and an estimated net salvage value of $18000 at the end of 30 years. Assume an
interest rate of 7%. What is the present equivalent cost of the investment if the planning horizon is 30
years?
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