Problem:
A bakery decides to buy an oven. This oven will cost $7000 and is expected to last for 15 years. Annual operation and maintenance costs for the oven is 350 dollars per year and the salvage value for this type of oven is usually 4% of the original capital cost. Assume an interest rate of 6% compounded annually.
Required:
Question 1: What is the annualized cost of the oven?
Question 2: If the products from the oven bring in $300,000/year in annual revenue, what is the Net Present Value for this project?
Note: Please answer in proper manner and show all computations