Question

Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. Aerotron Electronics must borrow 1/2 of the purchase price, but they cannot start repaying the loan for 2 years. The bank has agreed to three equal annual payments, with the 1st payment due at the end of year 2. The loan interest rate is 6.0% compounded annually. Aerotron Electronics, MARR is 10% compounded annually. Click here to access the TVM Factor Table Calculator What is the future worth of this investment? $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is +20. What is the decision rule for judging the attractiveness of investments based on future worth? Should Aerotron Electronics buy the water filtration system?