A small company heats its building and spends $8,000 per ye of natural gas are e
ID: 1157646 • Letter: A
Question
A small company heats its building and spends $8,000 per ye of natural gas are expected to be 10% per year starting one year from now (ie., the first cash flow is $8,800 at EOY one). The 12% per year starting one year from now (ie, the first cash flow for this expense is S37520 at the EOY one). If ar on natural gas for this purpose. Cost increases ir maintenance on the gas furnace is $335 per year, and this expense is expected to increase by planning horizon is 13 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 18% per year. Click the icon to view the interest and annuity table for discrete compounding when i 10% per year. Click the icon to view the interest and annuity table for discrete compounding when i-12% per year. Click the icon to view the interest and annuity table for discrete compounding when i-18% per year. The total annual equivalent expense for operating and maintaining the furnace is s 14043.52 thousands. (Round to two decimal places.)Explanation / Answer
PNG= A1 { [1- (1+g )N/(1+i)N ]/[ i-g ] } = $8800 { [1- (1+0.10 )15/(1+0.18)15 ]/[ 0.18 - 0.10 ]
= $71,624.61
PMaint.= A1 { [1- (1+g )N/(1+i)N ]/[ i-g ] } = $ 396.75 { [1- (1+0.15 )15/(1+0.18)15 ]/[ 0.18 - 0.15 ]} =$3,229.21
A = (PNG + PMaint.)(A/P, 18%, 15) = $14,701.50