Reference no: EM132534620

Question - A new furnace for your small factory will cost $28,000 and a year to install, will require ongoing maintenance expenditures of $1,600 a year. But it is far more fuel-efficient than your old furnace and will reduce your consumption of heating oil by 2,500 gallons per year. Heating oil this year will cost $3 a gallon; the price per gallon is expected to increase by $0.50 a year for the next 3 years and then to stabilize for the foreseeable 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 10%. What is the annual savings?