15. A heavy construction company purchased an excavator for $540,000.00. Operating and maintenance costs will be $36,000.00 for the first year and increase by $30,000.00 each year. The first year the firm will have an income of $660,000.00 and the income will decrease by $5,000.00 each year. The salvage value of the excavator will be $150,000.00 in year 10. Calculate the rate of return for the excavator using net present worth analysis. Calculate the rate of return using equivalent uniform annual worth analysis.
15. A heavy construction company purchased an excavator for $540,000.00. Operating and maintenance costs will be $36,000.00 for the first year and increase by $30,000.00 each year. The first year the firm will have an income of $660,000.00 and the income will decrease by $5,000.00 each year. The salvage value of the excavator will be $150,000.00 in year 10. Calculate the rate of return for the excavator using net present worth analysis. Calculate the rate of return using equivalent uniform annual worth analysis.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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15. A heavy construction company purchased an excavator for $540,000.00. Operating and maintenance costs will be $36,000.00 for the first year and increase by $30,000.00 each year. The first year the firm will have an income of $660,000.00 and the income will decrease by $5,000.00 each year. The salvage value of the excavator will be $150,000.00 in year 10. Calculate the rate of return for the excavator using net present worth analysis. Calculate the rate of return using equivalent uniform annual worth analysis.
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