calculate the PV of expenses

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Please help me solve the following:

Two electrical systems are being compared for a new industrial plant. The one system will have first cost of $200,000 and annual operating costs of $10,000.

The second system will have first cost of $300,000 and annual operating costs of $5,000.

Each system will be depreciated over a period of 10 years using straight line depreciation. The company is in a 35% tax bracket. Which system should be selected if they both help produce the same expected profits over the life of the investment?

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Solution Summary

Calculate the PV of expenses.

$2.19