contestada

Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of $18,500 per year. An emission reduction filter will cost $75,000 and have an expected life of 5 years. Carlisle’s MARR is 10%/year.
a. What is the annual worth of this investment?
b. Is the filter economically justified? Why?

Respuesta :

TomShelby

Answer:

equivalent annual cost: 19,784.81

The investment is not economically justified as it is cheaper to pay the fines than invest in the equipment to avoid them.

Explanation:

We calcualte the PMT of a 75,000 dollars equipment at 10%

[tex]PV \div \frac{1-(1+r)^{-time} }{rate} = C\\[/tex]

PV 75,000

time 5

rate 0.1

[tex]75000 \div \frac{1-(1+0.1)^{-5} }{0.1} = C\\[/tex]

C                 $ 19,784.811

EPA fines:       $ 18,500.00  

differential:          (1, 284.81)

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