RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire ($
Question:
RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire \(\$ 30,000\) purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12 percent/year. It is anticipated that the sprinkler system would be used for 9 years and then sold for a salvage value of \(\$ 2,000\). Annual operating and maintenance expenses for the system over the 9 -year life are estimated to be \(\$ 9,000\) per year. If the new system is purchased, cost savings of \(\$ 15,000\) per year will be realized over the present manual watering system. RealTurf uses a MARR of 15 percent/year for economic decision making. Based on a present worth analysis, is the purchase of the new sprinkler system economically attractive?
Step by Step Answer:
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt