How much should the smog control district pay to firm

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Reference no: EM13236102

A firm expects to install smog control equipment on the exhaust of a gasoline engine. The local smog control district has agreed to pay to the firm a lump sum of money to provide for the first cost of the equipment and maintenance during its 10-year useful life. At the end of 10 years the equipment, which initially cost $10,000, is valueless. The firm and the smog control district have agreed that the following are reasonable estimates of the end-of-the year maintenance costs:

Year 1 $500 Year 6 $200
2 100 7 225
3 125 8 250
4 150 9 275
5 175 10 300

Assuming interest at 6% per year, how much should the smog control district pay to the firm now to provide for the first cost of the equipment and its maintenance for 10years?

Reference no: EM13236102

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