Farmer is considering the installation of a fuel storage

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Reference no: EM13571773

Farmer is considering the installation of a fuel storage system that will save $0.065 per gallon because the fuel can be purchased in bulk. The farmer uses about 20,000 gallons per year. The system will cost $10,000 to install. The annual operating and maintenance cost will be nothing in the first year but will increase by $25 each year thereafter. After ten years that the system will be used it will have a salvage value of $3,000. The Farmer's cost of funds is 12%. What is the equivalent uniform annual benefit or cost for the fuel storage system? Based on this analysis, should the farmer purchase the fuel storage?

Reference no: EM13571773

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