Question

In: Economics

economics question be clear show steps and solution for rating solve in 40 minutes for rating...

economics question

be clear show steps and solution for rating solve in 40 minutes for rating

Seven years ago a New Brunswick logging company purchased a used wood chipper for $131,000 for biomass and custom chipping. Operating and maintenance costs averaged $4,000 per year. A complete overhaul at the end of year 4 cost additional $9,000. Annual revenue from using the chipper was $20,000 per year. Calculate the annual worth of the chipper at 7% interest rate

(Note: Round your answer to 2 decimal places and do not use the $ sign in your answer)

Solutions

Expert Solution

Here, Net annual Revenue (A) = 20,000 - 4,000 = 16,000

i = 7%

n = 7

Present worth = -131,000 + 16,000(P/A, 7%, 7) - 9,000(P/F, 7%, 4)

                       = -131,000 + 16,000(5.389) - 9,000(0.7629)

                       = -131,000 + 86,224 - 6866.1

                       = -51,642.1

Annual Worth = PW(A/P, i, n)

                       = -51,642.1(A/P, 7%, 7)

                       = -51,642.1(0.1856)

                       = -9,584.77


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