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Ali wants to install a new air conditioning system in his shopping mall
Ali wants to install a new air conditioning system in his shopping mall. He found that purchasing and installing the system costs $100,000 and the sale advisor informed him that he expects to save $30,000 every year on electricity bills. The firm's MARRIS 15% per year, maintenance costs are expected to be $5,000 per year and the system's market value will be $20,000 at the end of 15 years. Using the PW method, determine whether the system should be installed.
Expert Solution
| Particulars | Year | Cash inflow/ (outflow) | PVIF/Annuity | Present value of Cash inflow/(Outflow) |
| Purchase and installation Cost | 0 | -1,00,000.00 | 1.0000 | -1,00,000.00 |
| Saving in Electric Bill | 1-15 | 30,000.00 | 5.8474 | 1,75,422.00 |
| Annual Maintenance Cost | 1-15 | -5,000.00 | 5.8474 | -29,237.00 |
| Salvage Value at the end | 15 | 20,000.00 | 0.1229 | 2,458.00 |
| Net Present Value | 48,643.00 | |||
| Since Ali will have net benefit in terms of present value of Rs. $ 48,643. He should install it. |
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