A company purchases a piece of equipment for $15,000. After nine years, the salvage value is...

 

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A company purchases a piece of equipment for $15,000. After nine years, the salvage value is $900. The annual insurance cost is 5% of the purchase price, the electricity cost is $600/yr, and the maintenance and replacement parts cost is $120/yr. The effective annual interest rate is 10%. Neglecting taxes, what is most nearly the present worth of the equipment if it is expected to save the company $4500 per year? (A) $2300 (B) $2800 (C) $3200 (D) $3500 A company purchases a piece of equipment for $15,000. After nine years, the salvage value is $900. The annual insurance cost is 5% of the purchase price, the electricity cost is $600/yr, and the maintenance and replacement parts cost is $120/yr. The effective annual interest rate is 10%. Neglecting taxes, what is most nearly the present worth of the equipment if it is expected to save the company $4500 per year? (A) $2300 (B) $2800 (C) $3200 (D) $3500

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