Mattie Moon

Business

2 October, 16:54

A small company heats its building and spends $7 comma 800 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 10 % per year starting one year from now (i. e., the first cash flow is $8 comma 580 at EOY one). Their maintenance on the gas furnace is $345 per year, and this expense is expected to increase by 12 % per year starting one year from now (i. e., the first cash flow for this expense is $386.40 at the EOY one). If the planning horizon is 15 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 15 % per year.