A contractor has a 4-year concrete mixer whose first cost was S6,000, having 3 more years to live before being serapped and sold at S872. It could now be sold for S14,109. It has an annual cost for operation and maintenance of $6,479. Its replacement is being proposed with a new machine whose first cost will be S8.000 having a life of 9 years and salvage value S1.600. It has an operating cost of Sso0 per year and maintenance cost of S320 per year. If the interest is 23% epd-a, what is the Anaual Equivalent Cost of the Old Machine?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
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Chapter17: Long-term Investment Analysis
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A contractor has a 4-year conerete mixer whose first cost was S6,000, having 3 more years to live before
being serapped and sold at $872. It could now be sold for S14,109. It has an annual cost for operation and
maintenance of S6,479. Its replacement is being proposed with a new machine whose first cost will be
$8,000 having a life of 9 years and salvage value S1.600. It has an operating cost of Ss00 per year and
maintenance cost of $320 per year. If the interest is 23% epd-a, what is the Annual Equivalent Cost of the
Old Machine?
Transcribed Image Text:A contractor has a 4-year conerete mixer whose first cost was S6,000, having 3 more years to live before being serapped and sold at $872. It could now be sold for S14,109. It has an annual cost for operation and maintenance of S6,479. Its replacement is being proposed with a new machine whose first cost will be $8,000 having a life of 9 years and salvage value S1.600. It has an operating cost of Ss00 per year and maintenance cost of $320 per year. If the interest is 23% epd-a, what is the Annual Equivalent Cost of the Old Machine?
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