Question: How do I solve for Merry Industries is considering a new piece of equipment for a project lasting 10 years with details as shown below.

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Merry Industries is considering a new piece of equipment for a project lasting 10 years with details as shown below. The costs and benefits are expected to keep increasing with the inflation rate even when a new machine is put into operation. Taking these into account, what is the annual worth that the company can expect from the machine?
Initial cost $95,000
MARR 14% p y c y
Inflation rate 3% p y c y
Life 7 years
Project life 10 years
Machine value today with life of 3 years $34,500
Machine value today with life of 7 years $23,500
First year costs $12,200
First year benefits $36,800
Right Answer:

$4,779

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