Question 4 Part C: You have decided to invest in a project to build and run a production line for a friend. Your friend has specified that the production line needs to last forever, and will always be operational. The associated costs for the project are shown in the table below. How much should you charge your friend now for the production line in order to build and maintain the perpetual project? Interest rate is 6%. Costs Initial Cost Annual Operating & Maintenance Costs Year incurred Year O Major Maintenance Costs Amount $175,000 $10,000 $80,000 Question 4 Part C: What is the equation used to find the portion of the cost due to the Annual Cost (annual operating and maintenance costs)? Per year, forever First in year 5, then every 5 years forever P = 10,000/0.06 OP=10,000/0.06 +80,000(P/A, 0.06, 5) OP=10,000(P/F, 0.06, 1) + 80,000(P/A, 0.06, 10)

Question 4 Part C: You have decided to invest in a project to build and run a production line for a friend. Your friend has specified that the production line needs to last forever, and will always be operational. The associated costs for the project are shown in the table below. How much should you charge your friend now for the production line in order to build and maintain the perpetual project? Interest rate is 6%. Costs Initial Cost Annual Operating & Maintenance Costs Year incurred Year O Major Maintenance Costs Amount $175,000 $10,000 $80,000 Question 4 Part C: What is the equation used to find the portion of the cost due to the Annual Cost (annual operating and maintenance costs)? Per year, forever First in year 5, then every 5 years forever P = 10,000/0.06 OP=10,000/0.06 +80,000(P/A, 0.06, 5) OP=10,000(P/F, 0.06, 1) + 80,000(P/A, 0.06, 10)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.5CE: Energy entrepreneur T. Boone Pickens has proposed converting the trucking fleet in the United States...

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