Question

The XYZ corporation is planning to purchase an extruder at a purchase price of $350,000. XYZ plans to make down payment of 25% of the first cost of the extruder and to make a 7 year,10% yearly payment loan for the rest of the first cost of the extruder. XYZ believes that the extruder can be sold for $75,000 at the end of its 15 year service life. The new extruder will increase XYZ's annual income by $90,000. Maintenance and operating costs are expected to be $4000 during the first year and to increase by $1200 each year. XYZ uses a before tax MARR of 12% for its preliminary economic studies. What is the before tax present worth of the extruder to XYZ?

Answer 1

Have you considered using a spreadsheet to calculate this?

Present value of 75K(fifteen years hence)+value of 90k/yr spread over fifteen years-operating and maintenance costs spread over years.