Answer:
The maximum price the buildng owner should pay for this system is $10,903.
Explanation:
The investment of the purchase of this system must be recovered in 15 years, being the positive cash flows the annual savings and the salvage value.
We can express the net present value of the investment as:
[tex]NPV=-P+\sum_{k=1}^{15}\frac{AS}{(1+i)^k}+\frac{SV}{(1+i)^{15}}=0\\\\\\0=-P+1000*\sum_{k=1}^{15}\frac{1}{(1.05)^k}+\frac{0.1P}{(1.05)^{15}} \\\\\\0=-P+1,000*10.38+0.048P\\\\\\0=-P+10,380+0.048P\\\\\\(1-0.048)P=10,380\\\\\\P=\frac{10,380}{0.952}=10,903[/tex]
The maximum price the buildng owner should pay for this system is $10,903.
