A company has invested in machinery that $23,000 to purchase and install and the company purchased a 3 year warranty for $5,000. The warranty covers all maintenance and repairs for three years with no cost to the company. At year 4, the maintenance costs are estimated at $2,000 and will increase by $1,200 per year after that. Operating costs are expected to be $800 every year. The machinery will last nine years. If the interest rate is 6%, what is the machinery's economic life that minimizes the EUAC?

A company has invested in machinery that $23,000 to purchase and install and the company purchased a 3 year warranty for $5,000. The warranty covers all maintenance and repairs for three years with no cost to the company. At year 4, the maintenance costs are estimated at $2,000 and will increase by $1,200 per year after that. Operating costs are expected to be $800 every year. The machinery will last nine years. If the interest rate is 6%, what is the machinery's economic life that minimizes the EUAC?

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

A company has invested in machinery that $23,000 to purchase and install and
the company purchased a 3 year warranty for $5,000. The warranty covers all
maintenance and repairs for three years with no cost to the company. At year 4,
the maintenance costs are estimated at $2,000 and will increase by $1,200 per
year after that. Operating costs are expected to be $800 every year. The
machinery will last nine years. If the interest rate is 6%, what is the machinery's
economic life that minimizes the EUAC?

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