Equivalent annual savings derived from furnace

Reference no: EM13201841

A new furnace for your small factory will cost $4500 a year to install and will require ongoing maintenance eexpenditures of $1400 a year. But it is far more fuel efficient than your old furnace and will reduce your consumption of heating oil by 4200 gallons per year. Heating oil this year will cost $2 a gallon; the price per gallon is expected to increse by $.50 a year for the next 3 years and then to stabilize for the foreseeble future. The furnace will last for 20 years at which point it will need to be replaced and will have no salvage value. The discount rate is 12%.

A: What is the net present value of the investment in the furnance?

B: What is IRR?

C: What is the payback period?

D: What is equivalent annual cost of furnace?

E: What is equivalent annual savings derived from furnace?

Reference no: EM13201841

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