Reference no: EM131431934

Your company needs to replace its natural gas-fired commercial boiler. The old model (with basic features) has a capacity of 50 MBtu/hr and was purchased in 2007 at the cost of $181,000. However, the old model is now out of production and no longer available in the market. You are considering purchasing the newer basic model of the same design, which has a capacity of 71 MBtu/hr. Your manager also wants to add some optional features presently costing $28,000 to the basic model. 1) If the cost index was 162 for this type of equipment in 2007 and is 221 now, given the applicable cost capacity factor at 0.8, what is your estimate of the purchase price for the new boiler? 2) If your company plans to take a 10-year loan at an interest rate of 3.8% to finance this equipment purchase, what would be the total cost your company needs to pay in 10 years? What if the term of the loan is 15-year or 30- year and what if the interest rate changes to 3.5% or 4.2%?