What is the total annual equivalent expense for operating

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Reference no: EM131977016

Problem

A small company heats its building and spends $8,000 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 99% per year starting one year from now (i.e., the first cash flow is $8,720 at EOY one). Their maintenance on the gas furnace is $350 per year, and this expense is expected to increase by 15% per year starting one year from now (i.e., the first cash flow for this expense is $402.50 at the EOY one). If the planning horizon is 14 years, what is the total annual equivalent expense for operating and maintaining the furnace The interest rate is 18% per year. What is the total annual equivalent expense for operating and maintaining the furnace?

Reference no: EM131977016

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