You plan to install a new air conditioner in your office. The new air conditioner costs P50,000 (including delivery and installation). It is estimated that the air conditioner can save up to P11,000 in electricity costs per year. If the air conditioner's market value will be P7,500 after 6 years, is installing the new air conditioner a good idea? The Minimum Attractive Rate of Return (MARR) is 20%. Use the future worth method to evaluate.

To evaluate the financial viability of installing the new air conditioner, we can calculate the future worth of the costs and benefits associated with the investment.

First, let's calculate the total cost of the air conditioner over 6 years. The initial cost is P50,000, and there are no additional costs mentioned. Therefore, the total cost remains at P50,000.

Next, let's calculate the total benefit from the electric cost savings. The annual savings is P11,000, and the investment period is 6 years. Therefore, the total benefit is 6 x P11,000 = P66,000.

Now, let's calculate the future worth of the market value of the air conditioner after 6 years. The market value is given as P7,500.

To determine whether installing the air conditioner is a good idea, we compare the future worth of the benefits and the future worth of the costs.

The future worth of the costs is P50,000, as there are no additional costs mentioned.

The future worth of the benefits is P66,000, as calculated earlier.

The future worth of market value is P7,500.

To find the net future worth, we subtract the future worth of the costs and the market value from the future worth of the benefits: P66,000 - P50,000 - P7,500 = P8,500.

Since the net future worth is positive (P8,500), installing the new air conditioner is a good idea according to the future worth method.

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