(Solved): 33 Hinson's Homegrown Farms needs a new irrigation system. System one will cost $145,000, have annu ...

33 Hinson's Homegrown Farms needs a new irrigation system. System one will cost $\$145,000$, have annual maintenance costs of $\$10,000$, and need an overhaul at the end of year six costing $\$30,000$. System two will have first-year maintenance costs of $\$5000$ with increases of $\$500$ each year thereafter. System two would not require an overhaul. Both systems will have no salvage value after 12 years. If Hinson's cost of capital is $4\%$, using annual worth analysis determine the maximum Hinson's should be willing to pay for system two. Contributed by $Ed$ Wheeler, University of Tennessee at Martin