XYZ Company purchased a machine six years ago for $350,000. Last year a replacement study was performed wi the decision to retain the machine for 2 more years. However, this year the situation has changed. The machine estimated to have a value of only $8,000 now and if it is to be kept in service, upgrading at a cost of $50,000 will necessary to make it useful for up to 2 more years. Operating cost is expected to be $10,000 the first year and $15,0 the second year, with no salvage value at all. Alternatively, the company can purchase a new machine with an E of 7 years, no salvage value, and an equivalent annual cost of $ -55,540 per year. The MARR is 10% per year. the estimates above, determine U- a) When the company should replace the upgraded machine?

XYZ Company purchased a machine six years ago for $350,000. Last year a replacement study was performed wi the decision to retain the machine for 2 more years. However, this year the situation has changed. The machine estimated to have a value of only $8,000 now and if it is to be kept in service, upgrading at a cost of $50,000 will necessary to make it useful for up to 2 more years. Operating cost is expected to be $10,000 the first year and $15,0 the second year, with no salvage value at all. Alternatively, the company can purchase a new machine with an E of 7 years, no salvage value, and an equivalent annual cost of $ -55,540 per year. The MARR is 10% per year. the estimates above, determine U- a) When the company should replace the upgraded machine?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Define replacement analysis
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