Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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 Athena Books Company is contemplating the installation of a wastewater recycling system. The amount to be invested in this system is $400,000. The system is expected to last 8 years and has no salvage value. Which of the following situations supports the installation of the recycling system? Assume the present value factor for an annuity of $1 at 10% for 8 periods is 5.3349 and the present value factor for $1 at 10% for 8 periods is 0.4665.

  1. The total cash flow savings expected from the recycling system is $700,000.
  2. The annual maintenance cost for the system is $40,000.
  3. The annual maintenance cost for the system is equal to the cost of the existing water system.
  4. The recycling system will yield a savings of $78,000 per year.
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