Salvage Value [Engineering Economy]

1. Oct 14, 2007

Heat

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.

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.

2. Oct 15, 2007

Staff: Mentor

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)?