Determine the annual capital recovery cost (ownership cost) for the equipment.

The owner of a business is considering investing $55000 in new equipment. She estimates that the ne Show more The owner of a business is considering investing $55000 in new equipment. She estimates that the net cash flow will be $5000 during the first year and will increase by $2500 per year each year thereafter. The equipment is estimated to have a 10 year service life and a net salvage value at the end of this time of $6000. The firms interest rate is 12% compounded annually. (a) Determine the annual capital recovery cost (ownership cost) for the equipment. (b) Determine the equivalent annual savings (revenue). (c) Determine whether this investment is wise. Show less


 

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