Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $39,000. It has an expected life of 7 years at which time its salvage value will be $6,000. 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 $15,000 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 3 equal annual payments, with the 1st payment due at the end of year 2. The loan interest rate is 9.5 % compounded annually. Aerotron Electronics' MARR is 11.0 % compounded annually.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs
$39,000. It has an expected life of 7 years at which time its salvage value will be $6,000. 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 $15,000 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 3 equal annual payments,
with the 1st payment due at the end of year 2. The loan interest rate is 9.5 % compounded annually. Aerotron Electronics' MARR is
11.0 % compounded annually.
Part a
Your answer is incorrect.
What is the present worth of this investment? $
Transcribed Image Text:Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $39,000. It has an expected life of 7 years at which time its salvage value will be $6,000. 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 $15,000 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 3 equal annual payments, with the 1st payment due at the end of year 2. The loan interest rate is 9.5 % compounded annually. Aerotron Electronics' MARR is 11.0 % compounded annually. Part a Your answer is incorrect. What is the present worth of this investment? $
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