1. A company is trying to decide whether it should upgrade a machine it has or purchase a newer version of the machine. It will need to use the machine for the next 6 years. If it upgrades the machine it already owns, this would cost $40,000; the machine it owns would cost $10,000 per year to operate and maintain. At the end of 6 years, the machine would have a salvage value of $2,000. Alternatively, it could trade in the machine it owns for $20,000 and purchase a new machine for $90,000. The new machine would cost $2,000 per year to operate and maintain. At the end of 6 years, the machine would have a salvage value of $15,000. Assuming the company has a MARR of 10%, compute the EUAC of both the upgraded and new machine using the cash flow approach (to nearest dollar).

1. A company is trying to decide whether it should upgrade a machine it has or purchase a newer version of the machine. It will need to use the machine for the next 6 years. If it upgrades the machine it already owns, this would cost $40,000; the machine it owns would cost $10,000 per year to operate and maintain. At the end of 6 years, the machine would have a salvage value of $2,000. Alternatively, it could trade in the machine it owns for $20,000 and purchase a new machine for $90,000. The new machine would cost $2,000 per year to operate and maintain. At the end of 6 years, the machine would have a salvage value of $15,000. Assuming the company has a MARR of 10%, compute the EUAC of both the upgraded and new machine using the cash flow approach (to nearest dollar).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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