Calculate the annual worth.

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Chapter 6, Problem 9P

To determine

Calculate the annual worth.

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A company is considering investing $17,500 in a heat exchanger. The heat exchanger will last five vears, at which time it will be sold for $2.000, The maintenance cost at the end of the first vear is estimated to be $1.500. Maintenance costs for the exchanger are estimated to increase by $1,000 per year over its life. As an alternative, the company may lease the equipment for $X per year, including maintenance, with the annual payments to made at the end of each year. a. Choose cash flow diagrams of both alternatives b. For what value of X should the company lease the heat exchanger? The company expects to earn 8% on its investments. Assume end-of-year lease payments. Click the icon to view the interest and annuity table for discrete compounding when i= 8% per year. EOY EOY $2,000 2 3 4 5 2 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $2,500 $3.500 $4,500 $5,500 $17,500 $17,500 OD. C. EOY $2,000 EOY $2,000 1 2 3 5 2. $1,500 $2,500 $3,500 $4,500 $5.500 $4.500 $3.500 $2,500 $1,500 $5,500…

A company is considering investing $17,500 in a heat exchanger. The heat exchanger will last five years, at which time it will be sold for $2,000. The maintenance cost at the end of the first year is estimated to be $1,500. Maintenance costs for the exchanger are estimated to increase by $1,000 per year over its life. As an alternative, the company may lease the equipment for $X per year, including maintenance, with the annual payments to made at the end of each year. a. Choose cash flow diagrams of both alternatives. b. For what value of X should the company lease the heat exchanger? The company expects to earn 8% on its investments. Assume end-of-year lease payments. Click the icon to view the interest and annuity table for discrete compounding when i= 8% per year. $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $2,500 $3,500 $4,500 $5,500 $17,500 $17,500

Consider the two investments with the following sequences of cash flows Compute for i* for each investment What are the NPW of each alternatives with an MARR of 15% If A & B are mutually exclusive, which project is more economically desirable? (Incremental)