A 3-year-old manufacturing equipment, which has a present market value of $13,000, is being considered for early replacement. The estimated five-year market values and annual operating costs are shown below. The AW replacement values of year 1 and 2 have already been conducted, help the company determine the total AW₁ replacement value (year 3 only) which will consider how long the asset should be retained, its ESL. The interest rate is 10% per year. Year j (1) 12345 5 MV, (2) $9000 8000 6000 2000 0 AOC, (3) $-2500 -2700 -3000 <-3500 4500

A 3-year-old manufacturing equipment, which has a present market value of $13,000, is being considered for early replacement. The estimated five-year market values and annual operating costs are shown below. The AW replacement values of year 1 and 2 have already been conducted, help the company determine the total AW₁ replacement value (year 3 only) which will consider how long the asset should be retained, its ESL. The interest rate is 10% per year. Year j (1) 12345 5 MV, (2) $9000 8000 6000 2000 0 AOC, (3) $-2500 -2700 -3000 <-3500 4500

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

4. A 3-year-old manufacturing equipment, which has a present market value of $13,000, is being
considered for early replacement. The estimated five-year market values and annual operating
costs are shown below. The AW replacement values of year 1 and 2 have already been
conducted, help the company determine the total AW3 replacement value (year 3 only) which
will consider how long the asset should be retained, its ESL. The interest rate is 10% per year.
Year j
(1)
1
2
345
MV,
(2)
$9000
8000
6000
2000
0
AOC,
(3)
$-2500
-2700
-3000
-3500
-4500

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