A company owns a 5-year-old turret lathe that has a book value of $25,000. The present market value for the lathe is $16,000. The expected decline in market value is $2,000/year to a minimum market value of $4,000; maintenance plus operating costs for the lathe equal $4,200/year.A new turret lathe can be purchased for $45,000 and will have an expected life of 8 years. The market value for the turret lathe is expected to equal$45,000(0.70)k at the end of year k. Annual maintenance and operating cost is expected to equal $1,600. Based on a 12% MARR, should the old lathe be replaced now? Use an equivalent uniform annual cost comparison, a planning horizon of 7 years, and the cash flow approach.
A company owns a 5-year-old turret lathe that has a book value of $25,000. The
$45,000(0.70)k at the end of year k. Annual maintenance and operating cost is expected to equal $1,600. Based on a 12% MARR, should the old lathe be replaced now? Use an equivalent uniform annual cost comparison, a planning horizon of 7 years, and the cash flow approach.
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