A 5 year-old tooling kit that was purchased new for $9000 has a current market value of $4000 and expected 0&M costs of $3000, increasing by $1200 per year. Future market values are expected to decline by 25% annually (going forward). The kit can be used for another 3 years at most. The optimal replacement kit costs $8000 and has 0&M costs starting at $2500 per year, increasing by $2000 per year. Salvage value for the new kit at the end of the first year is $4000 and falls by $1000 per year thereafter (until zero). The new model kit will be needed indefinitely. Assume a unique minimum AEC~(15%) for both kits (both the current and replacement kit). The MARR is 15%. 1) What is the AECc• ? a) Less than 6925.70 b) 6925.70-6945.70 c) 6945.70-6965.70 d) 6965.70-6985.70 e) More than 6985.70

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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A 5 year-old tooling kit that was purchased new for $9000 has a current market
value of $4000 and expected 0&M costs of $3000, increasing by $1200 per year.
Future market values are expected to decline by 25% annually (going forward). The
kit can be used for another 3 years at most. The optimal replacement kit costs $8000
and has 0&M costs starting at $2500 per year, increasing by $2000 per year.
Salvage value for the new kit at the end of the first year is $4000 and falls by $1000
per year thereafter (until zero). The new model kit will be needed indefinitely.
Assume a unique minimum AEC~(15%) for both kits (both the current and
replacement kit).
The MARR is 15%.
1) What is the AECC• ?
a) Less than 6925.70
b) 6925.70-6945.70
c) 6945.70-6965.70 )
d) 6965.70-6985.70
e) More than 6985.70
Transcribed Image Text:A 5 year-old tooling kit that was purchased new for $9000 has a current market value of $4000 and expected 0&M costs of $3000, increasing by $1200 per year. Future market values are expected to decline by 25% annually (going forward). The kit can be used for another 3 years at most. The optimal replacement kit costs $8000 and has 0&M costs starting at $2500 per year, increasing by $2000 per year. Salvage value for the new kit at the end of the first year is $4000 and falls by $1000 per year thereafter (until zero). The new model kit will be needed indefinitely. Assume a unique minimum AEC~(15%) for both kits (both the current and replacement kit). The MARR is 15%. 1) What is the AECC• ? a) Less than 6925.70 b) 6925.70-6945.70 c) 6945.70-6965.70 ) d) 6965.70-6985.70 e) More than 6985.70
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