Solar Hydro manufactures a revolutionary aeration system that combines coarse and fine bubble aeration components. This year (year 1) the cost for check valve components is $12,000. Based on closure of a new contract with a distributor in China and volume discounts, the company expects this cost to decrease. If the cost in year 2 and each year thereafter decreases by $1500, what is the equivalent annual cost for 8-year periods at an interest rate of 12% per year?
For the following cash flow diagram find equivalent present worth (P) at year zero.
i= 10% per year
0
1
2
3
4
5
6
7
8
Year
$90
$90
$90
$200
$200 $200