In: Economics
Use Excel to answer the following question:
Sundance Detective Agency purchased new surveillance equipment with
the following estimates. Note: The year index is k = 1, 2, 3, ...
to calculate the maintenance costs and extra revenues for the
corresponding years.
First cost ($) | 1,050 |
Annual maintenance cost ($ in year k) | 70 + 5k |
Extra revenue ($ in year k) | 200 + 50k |
Salvage value ($ at the end of the useful life) | 600 |
(a) Prepare a cash-flow (CF) table, do present worth (PW) analysis
using an appropriate Excel built-in function to calculate the
discounted payback period x with a return of 10% per year.
(b) For a preliminary conclusion, should the equipment be purchased
if the actual useful life is 7 years? Comment.