3. One of four ovens at the bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs P80,000 and this price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for 3 years and 4 years. The salvage value and maintenance costs are summarized in the table below. Both the old and new ovens have similar productivities and energy costs. Should the oven be replaced this year if the MARR equals to 10%?
3. One of four ovens at the bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs P80,000 and this price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for 3 years and 4 years. The salvage value and maintenance costs are summarized in the table below. Both the old and new ovens have similar productivities and energy costs. Should the oven be replaced this year if the MARR equals to 10%?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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3. One of four ovens at the bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs P80,000 and this price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for 3 years and 4 years. The salvage value and maintenance costs are summarized in the table below.
Both the old and new ovens have similar productivities and energy costs. Should the oven be replaced this year if the MARR equals to 10%?
Transcribed Image Text:Year Salvage Value at Maintenance
the end of the year Costs
P20,000
17,000
2
14,000
3 11,000
4 7,000
Old Oven
0
1
9,500
9,600
9,700
9,800
Salvage Value at Maintenance
the end of the year Costs
P80,000
75,000
70,000
66,000
62,000
0
0
New Oven
1,000
3,000
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