1. An economic analysis is used to determine the profitability of a machine. Assume the minimum attractive rate of return (interest rate) is 3%. What is the present worth of this investment alternative?
Initial cost = $11,000
Estimated life = 7 years
Salvage value = 3,800
Annual maintenance cost = 475
Annual income = 1,800
Income gradient = 120
a. PW = $3,500
b. PW = $2,450
c. PW = $2,500
d. PW = $2,350