Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $42,000. It has an expected life of 7 years at which time its salvage value will be $8,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $8,500 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. Aerotron Electronics must borrow 1/2 of the purchase price, but they cannot start repaying the loan for 2 years. The bank has agreed to 3 equal annual payments, with the 1st payment due at the end of year 2. The loan interest rate is 6.5% compounded annually. Aerotron Electronics’ MARR is 13.0% compounded annually.
What is the present worth of this investment?