An excavator is purchased now with a cost of$200,000. The excavator will need majormaintenance every year, with the firstmaintenance occurring at EOY 1. The cost ofmaintenance at EOY 1 is $20,000, and thecost increases by 2,000 each time it isperformed. The life of the excavator is 20years. At EOY 20, the excavator will be sold for$40,000. Nominal interest rate is given as24% compounded monthly. Find the netpresent worth of this investment.

We can populate the cash flows as below and calculate the NPW. Pls note that 24% compounded monthly…

Answered: present worth of this investment.

Business

Finance

present worth of this investment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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