value is $12,000. The annual insurance cost is 5% of the purchase price. The electricity co is $ 800 per year and maintenance and replacement parts cost is $1200 per year. T effective annual interest rate is 10% per year. What is the Present worth of the equipment it is expected to save the company $15,000 per year?
value is $12,000. The annual insurance cost is 5% of the purchase price. The electricity co is $ 800 per year and maintenance and replacement parts cost is $1200 per year. T effective annual interest rate is 10% per year. What is the Present worth of the equipment it is expected to save the company $15,000 per year?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please answer question 5 with details on how to do it. Thank you.
![5. A company purchases manufacturing equipment for $ 100,000. After 10 years, the salvage
value is $12,000. The annual insurance cost is 5% of the purchase price. The electricity cost
is $ 800 per year and maintenance and replacement parts cost is $1200 per year. The
effective annual interest rate is 10% per year. What is the Present worth of the equipment if
it is expected to save the company $15,000 per year?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F44a80f91-a3bf-4d1c-8517-bb06e895fca8%2Fe11b29f2-da91-4f5b-8212-cc591f7e95bf%2Fld4jl6h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5. A company purchases manufacturing equipment for $ 100,000. After 10 years, the salvage
value is $12,000. The annual insurance cost is 5% of the purchase price. The electricity cost
is $ 800 per year and maintenance and replacement parts cost is $1200 per year. The
effective annual interest rate is 10% per year. What is the Present worth of the equipment if
it is expected to save the company $15,000 per year?
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