Question
In: Economics
Nippon Steel’s expenses for heating and cooling a large manufacturing facility are expected to increase according...
Nippon Steel’s expenses for heating and cooling a large manufacturing facility are expected to increase according to an arithmetic gradient beginning in year 2. If the cost is $550,000 this year (year 0) and will be $550,000 again in year 1, but then it is estimated to increase by $52,000 each year through year 12, what is the equivalent annual worth in years 1 to 12 of these energy costs at an interest rate of 13% per year?
The equivalent annual worth is determined to be $ ?
Solutions
Expert Solution
Equivalent annual worth = 550,000(A/P, 13%, 12) + [550,000 + 52,000(A/G, 13%, 12)]
= 550,000(0.1690) + [550,000 + 52,000(4.094)]
= 92,950 + 762,888
= $855,838
Rahul Sunny answered 2 years agoRelated Solutions
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