Question
Luis is responsible for buying some specialized manufacturing equipment that has a purchase price of $10,000 and annual operating costs of$1000. The vendor is offering a special buyer incentive that provides free maintenance for the first four years. After that time, the maintenance is $500 per year over the 10-year life, and there is an overhaul expense in year 5 of$2000. The equipment has a salvage value of $1000. If the interest rate is 8%, what is the present value?
Solution
VerifiedAnswered 1 year ago
Answered 1 year ago
Step 1
1 of 5Given:
- First cost:
- Annual operating cost:
- Annual maintenance for the year to :
- Overhaul expense:
- Salvage value:
- Number of years: years
- Interest rate:
Required:
- Present worth of the costs
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