A 3-year-old manufacturing equipment, which has a present market value of $13,000, is being considered for early replacement. The estimated five-year market values and annual operating costs are shown below. The AW replacement values of year 1 and 2 have already been conducted, help the company determine the total AW₁ replacement value (year 3 only) which will consider how long the asset should be retained, its ESL. The interest rate is 10% per year. Year j (1) 12345 5 MV, (2) $9000 8000 6000 2000 0 AOC, (3) $-2500 -2700 -3000 <-3500 4500

A 3-year-old manufacturing equipment, which has a present market value of $13,000, is being considered for early replacement. The estimated five-year market values and annual operating costs are shown below. The AW replacement values of year 1 and 2 have already been conducted, help the company determine the total AW₁ replacement value (year 3 only) which will consider how long the asset should be retained, its ESL. The interest rate is 10% per year. Year j (1) 12345 5 MV, (2) $9000 8000 6000 2000 0 AOC, (3) $-2500 -2700 -3000 <-3500 4500

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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