A machine purchased 1 year ago for $85,000 costs more to operate than anticipated. When purchased, the machine was expected to be used for 10 years with annual maintenance costs of $22,000 and a $10,000 salvage value. However, last year, it cost the company $35,000 to maintain it, and these costs are expected to escalate to $36,500 this year and increase by $1500 each year thereafter. The market value is now estimated to be $85,000 − $10,000k, where k is the number of years since the machine was purchased. It is now estimated that this machine will be useful for a maximum of 5 more years. A replacement study is to be performed now. Determine the values of P, n, AOC, and S of this defender.
A machine purchased 1 year ago for $85,000 costs
more to operate than anticipated. When purchased,
the machine was expected to be used for 10 years
with annual maintenance costs of $22,000 and a $10,000 salvage value. However, last year, it cost
the company $35,000 to maintain it, and these costs
are expected to escalate to $36,500 this year and increase
by $1500 each year thereafter. The market
value is now estimated to be $85,000 − $10,000k,
where k is the number of years since the machine
was purchased. It is now estimated that this machine
will be useful for a maximum of 5 more years. A
replacement study is to be performed now. Determine
the values of P, n, AOC, and S of this defender.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
