A bakery is thinking of purchasing a small delivery truck that has a first cost of $18,000 and its to be kept in service for 6 years, at which time the salvage value is expected to be $2500. Maintenance and operating costs are estimated at $2500 the first year and will increase at a rate of $200 per year. Determine the present worth of this vehicle, using an interest rate of 12 percent.
Finding the regular annuity for such an arithmetic series,
Finding the present worth of maintenance costs given such an annuity, (NOTE: A here is A'' found previously)
Finding the present worth of the future salvage value,
Thus the overall present worth of the vehicle is,
Is this correct?