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Business, 26.06.2021 07:00 kaitlyn2030

A) A few furnace for your small factory will cost $ 27000 a year to install and will require ongoing maintenance expenditures of $1500 a year. But it is far more fuel efficient than your old furnace
and will reduce your consumption of heating oil by 2400 gallons per year. Heating oil this year will cost $3
a gallon; the price per gallon is expected to increased by $0.5 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 8% .

i- What is the net present value of the investment in the furnace? (4)
ii- What is the IRR? (4)
iii- What is the payback period?

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Answers: 2

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