A joint former cost $65,000 to purchase and $115,000 to install seven years ago. The market value now is $35,000, and this will decline by 12 percent of current value each year for the next three years. Operating and maintenance costs are estimated to be $3,600 this year and are expected to increase by $500 per year. Click the icon to view the table of compound interest factors for discrete compounding periods when i= 10%. a. How much should the EAC of a new joint former be over its economic life to justify replacing the old one sometime in the next three years? The MARR is 10 percent. The EAC would have to be less than $ (Round to the nearest cent as needed.) b. The EAC for a new joint former turns out to be $10,300 for a 10-year life. Should the old joint former be replaced within the next three years? If so, when? O A. Replace the old joint former in two years. O B. Do not replace the old joint former. O C. Replace the old joint former immediately. O D. Replace the old joint former in one year. c. Is it necessary to consider replacing the old joint former more than three years from now, given that a new one has an EAC of $10,300? O A. Check to see if the replacement is necessary only if the cost is zero. O B. It is not necessary to check to see if the replacement should be made more than three years later. OC. It is necessarv to check to see if the replacement should be made more than three vears later
A joint former cost $65,000 to purchase and $115,000 to install seven years ago. The market value now is $35,000, and this will decline by 12 percent of current value each year for the next three years. Operating and maintenance costs are estimated to be $3,600 this year and are expected to increase by $500 per year. Click the icon to view the table of compound interest factors for discrete compounding periods when i= 10%. a. How much should the EAC of a new joint former be over its economic life to justify replacing the old one sometime in the next three years? The MARR is 10 percent. The EAC would have to be less than $ (Round to the nearest cent as needed.) b. The EAC for a new joint former turns out to be $10,300 for a 10-year life. Should the old joint former be replaced within the next three years? If so, when? O A. Replace the old joint former in two years. O B. Do not replace the old joint former. O C. Replace the old joint former immediately. O D. Replace the old joint former in one year. c. Is it necessary to consider replacing the old joint former more than three years from now, given that a new one has an EAC of $10,300? O A. Check to see if the replacement is necessary only if the cost is zero. O B. It is not necessary to check to see if the replacement should be made more than three years later. OC. It is necessarv to check to see if the replacement should be made more than three vears later
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:A joint former cost $65,000 to purchase and $115,000 to install seven years ago. The market value now is $35,000, and this will decline by 12 percent of current value each year for
the next three years. Operating and maintenance costs are estimated to be $3,600 this year and are expected to increase by $500 per year.
Click the icon to view the table of compound interest factors for discrete compounding periods when i= 10%.
a. How much should the EAC of a new joint former be over its economic life to justify replacing the old one sometime in the next three years? The MARR is 10 percent.
The EAC would have to be less than $
(Round to the nearest cent as needed.)
b. The EAC for a new joint former turns out to be $10,300 for a 10-year life. Should the old joint former be replaced within the next three years? If so, when?
A. Replace the old joint former in two years.
B. Do not replace the old joint former.
C. Replace the old joint former immediately.
D. Replace the old joint former in one year.
c. Is it necessary to consider replacing the old joint former more than three years from now, given that a new one has an EAC of $10,300?
A. Check to see if the replacement is necessary only if the cost is zero.
B. It is not necessary to check to see if the replacement should be made more than three years later.
C. It is necessary to check to see if the replacement should be made more than three years later.
D. Check only if the joint former owner is shutting down within the specified time frame.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education