Should he purchase the storage tank?

The present price (year 0) of kerosene is $4.30 per gallon and its cost is expected to increase by Show more The present price (year 0) of kerosene is $4.30 per gallon and its cost is expected to increase by 10% per year. (At the end of year 1 kerosene will cost $4.73 per gallon.) Mr. Garcia uses about 800 gallons of kerosene for space heating during a winter season. He has an opportunity to buy a storage tank for $600 and at the end of four years he can sell the storage tank for $100. The tank has a capacity to supply four years of Mr. Garcias heating needs so he can buy four years worth of kerosene at its present price ($4.30) or he can invest his money elsewhere at 6%. Should he purchase the storage tank? Assume that kerosene purchased on a pay-as-you-go basis is paid for at the end of the year. (However kerosene purchased for the storage tank is purchased now. Please show the work for this question Show less

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