A piece of industrial machinery costs $48,000 to replace and has essentially no salvagevalue. Over the first five years of operation, maintenance costs amounted to $8,000. Ifthe maintenance cost rate is a linear function of time, what is the optimal age at whichto replace the machinery?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter11: Simulation Models
Section: Chapter Questions
Problem 45P: You now have 10,000, all of which is invested in a sports team. Each year there is a 60% chance that...
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A piece of industrial machinery costs $48,000 to replace and has essentially no salvage
value. Over the first five years of operation, maintenance costs amounted to $8,000. If
the maintenance cost rate is a linear function of time, what is the optimal age at which
to replace the machinery?

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