Grow fertilizers company purchases a gravity settling tank

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Reference no: EM13378844

Grow Fertilizers Company purchases a gravity settling tank of the $30,000 purchase price. The company finances 30% of the investment with a loan to be repaid with eight equal semiannual payments at an annual interest rate of 12% compounded semiannually. It is anticipated that the tank will be used for 9 years and then be sold for $2000 at that time. Annual operating and maintenance expenses are estimated to be $60,000/year increasing $5000 per year thereafter. A savings of $85,000/year in year 1 increasing by 2% per year thereafter are realized over the present filtration system. The firm uses a MARR (TVOM) of 15% for its economic analysis. Determine the following:

a. Present worth.

b. Equivalent annual worth.

c. Internal rate of return.

d. Draw conclusions about the economic feasibility of the investment.

Reference no: EM13378844

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