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Homework Help: Salvage Value [Engineering Economy]

  1. Oct 14, 2007 #1
    1. The problem statement, all variables and given/known data

    How much would the owner of a building be justified in paying for a sprinkler system that will save $750 a year in insurance premiums, if the system has to be replaced every 20 yrs and has a salvage value equal to 10% of its initial cost? Assume money is worth 7%.


    3. The attempt at a solution

    I just don't know where to commence, although the book does have the answer of $8156, I could place the answer, but I want to learn how to do this problem, as the answer won't be given to me on the test. :blushing:

    Also, forgive me if this forum does not offer help in these type of problems, but since I saw engineering and this is an engineering course, then I just went for it. :biggrin:
     
  2. jcsd
  3. Oct 15, 2007 #2

    Astronuc

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    Science Advisor

    One has to determine the Present Worth (PW) of the periodic savings $750/yr and the one time salvage value over the 20 year lifetime.

    Does one have access to a book or resource on how to treat PW based on periodic payments and future worth (FW)?
     
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