A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M costs are$105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer isreplaced, a new mixer will require an initial investment of $375,000. At the end of the 8-year planning horizon, itwill have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Analyzethis using an EUAC measure and a MARR of 15 percent to see if the concrete mixer should be replaced if the oldmixer is sold for its market value of $65,000.a. Use the cash flow approach (insider’s viewpoint approach). (11.2.1)b. Use the opportunity cost approach (outsider’s viewpoint approach). (11.3.1)
A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M costs are
$105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer is
replaced, a new mixer will require an initial investment of $375,000. At the end of the 8-year planning horizon, it
will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Analyze
this using an EUAC measure and a MARR of 15 percent to see if the concrete mixer should be replaced if the old
mixer is sold for its market value of $65,000.
a. Use the cash flow approach (insider’s viewpoint approach). (11.2.1)
b. Use the
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