Aerotron electronics is considering the purchase of a water, Ask an Expert

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Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $60,000. It has an expected life of 7 years at which time its salvage value will be $7,500. 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 $12,000 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 three equal annual payments, with the 1st payment due at the end of year 2. The loan interest rate is 9.0% compounded annually. Aerotron Electronics’ MARR is 10% compounded annually.

WHAT IS THE FUTURE WORTH OF THE INVESTMENT?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91261215

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