22 years to recover one time costs thus as long as

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53,000 / 43,308 = 1.22 years to recover one-time costs (Thus, as long as expect to be in business for at least two year, it is worth doing.) OR 42,948 x 5 years – 53,000 = 161,740 increase in profits over 5 years OR Increase in 1 st year profits = 43,308 – 8,000 – 9,000 (45,000 / 5years) = 25,948 Increase in 2 nd to 5 th year profits = 43,308 – 9,000 = 33,948 g) System cost $65,000 Incremental costs $20,000 Salvage (18,000) Net onetime cost 67,000 Savings : summer 18,345 (48*.7)(546) Savings : winter 15,724 (96*.7)(234)) Tax rebate 4,000 Annual savings 38,069 What should be done? Depends on how long the business will be in existence. 67,000/38,069 = 1.76 years The costs will be “recovered” in less than 2 years. Thus, as long as expect to be in business for at least two years, it is worth doing.
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