Determine the equivalent annual worth for the investment

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Reference no: EM13191287

A distillation column is purchased for $300,000. The firm finance 40% of the investment with its own resources, and the rest with a loan to be repaid in 10 equal semiannual payments at an interest rate of 6% compounded semiannual. (Hint recall that you can multiply or add money occurring at different point in time, once you calculate you semiannual loan payment, proper calculation is required to convert it to an annual equivalent value). Annual operating and maintenance costs for the first year are $30,000. Thereafter, operating and maintenance costs increase by 10%/year over the previous year's costs. At the end of 8 years the column will be sold for $50,000. During the life of the investment, annual revenue is expected related directly to the investment in the column. The revenue for the first year is expected to be $75,000, increasing by $10,000 over the previous year's revenue thereafter. Using a MARR (TVOM) of 12%, determine the equivalent annual worth for the investment, and conclude if the investment is economically feasible.

Reference no: EM13191287

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