5. A jeepney operator is confronted with a problem whether he will repair the old machine or to replace it with a new one. The old machine can be repaired at a cost of P9,000.00. The present salvage value of the old machine is P13,000.00. It is estimated that the repaired machine will last for 5 more years with a salvage value of P10,000.00. However, the new machine cost P57,000.00 and the salvage value is P15,000.00 after 30 years. Annual maintenance cost is P5,000.00 for the new machine and P6,500.00 for the repaired machine. If money worth's 8% per annum which machine should be adopted?
5. A jeepney operator is confronted with a problem whether he will repair the old machine or to replace it with a new one. The old machine can be repaired at a cost of P9,000.00. The present salvage value of the old machine is P13,000.00. It is estimated that the repaired machine will last for 5 more years with a salvage value of P10,000.00. However, the new machine cost P57,000.00 and the salvage value is P15,000.00 after 30 years. Annual maintenance cost is P5,000.00 for the new machine and P6,500.00 for the repaired machine. If money worth's 8% per annum which machine should be adopted?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:5. A jeepney operator is confronted with a problem whether he will repair the old
machine or to replace it with a new one. The old machine can be repaired at a
cost of P9,000.00. The present salvage value of the old machine is P13,000.00. It
is estimated that the repaired machine will last for 5 more years with a salvage
value of P10,000.00. However, the new machine cost P57,000.00 and the salvage
value is P15,000.00 after 30 years. Annual maintenance cost is P5,000.00 for the
new machine and P6,500.00 for the repaired machine. If money worth's 8% per
annum which machine should be adopted?
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