Kermit is considering purchasing a new computer system. The purchase price is $129477. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $7304 at that time. Over the 5-year period, Kermit expects to pay a technician $20,000 per year to maintain the system but will save $65085 per year through increased efficiencies. Kermit uses a MARR of 12 percent to evaluate investments. What is the net present worth for this new computer system?
Enter your answer in this format: 12345
Hint:
- Draw a CFD.
- There are two parts to this problem: The loan part, and the NPW part. Which part should you solve first in order to get a complete picture of the cash flow.
- Note that there are two interest rates, one is for the loan, and one is for the project evaluation.
- Loan and repayment for this problem is in the form of uniform series.