A machine was purchased 5 years ago for $12,000. At that time, its estimated life was 10 years with an estimated end-of-life salvage value of$1,200. The average annual operating and maintenance costs have been$14,000 and are expected to continue at this rate for the next 5 years.How ever, average annual revenues have been and are expected to be $20,000. Now, the firm can trade in the old machine for a new machine for $5,000. The new machine has a list price of $15,000, an estimated life of 10 years, annual operating and maintenance costs of $7,500, annual revenues of $13,000, and salvage values at the end of the jth year according to Sj = $15, 000 − $1, 500j, for j = 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Determine whether to replace or not by the annual worth method using a MARR equal to 15% compounded annually. Use a 5-year planning horizon and the cash flow approach.
A machine was purchased 5 years ago for $12,000. At that time, its estimated life was 10 years with an estimated end-of-life salvage value of
$1,200. The average annual operating and maintenance costs have been
$14,000 and are expected to continue at this rate for the next 5 years.How ever, average annual revenues have been and are expected to be $20,000. Now, the firm can trade in the old machine for a new machine for $5,000. The new machine has a list price of $15,000, an estimated life of 10 years, annual operating and maintenance costs of $7,500, annual revenues of $13,000, and salvage values at the end of the jth year according to Sj = $15, 000 − $1, 500j, for j = 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Determine whether to replace or not by the annual worth method using a MARR equal to 15% compounded annually. Use a 5-year planning horizon and the cash flow approach.
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