A piece of equipment has a first cost of $60000, a maximum useful life of 4 years, and a market (salvage) value described by the relation Sk = 48000 – 8400k, where k is the number of years since it was purchased. The AOC series is estimated using AOC = 24000 + 3600k. The interest rate is 9% per year. When should the company replace this asset?
A piece of equipment has a first cost of $60000, a maximum useful life of 4 years, and a market (salvage) value described by the relation Sk = 48000 – 8400k, where k is the number of years since it was purchased. The AOC series is estimated using AOC = 24000 + 3600k. The interest rate is 9% per year. When should the company replace this asset?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
A piece of equipment has a first cost of $60000, a maximum useful life of 4 years, and a market (salvage) value described by the relation Sk = 48000 – 8400k, where k is the number of years since it was purchased. The AOC series is estimated using AOC = 24000 + 3600k. The interest rate is 9% per year. When should the company replace this asset?
![i
9%
F/P
P/F
A/F
F/A
A/P
P/A
P/G
A/G
1
1.0900
0.9174
1.0000
1.0000
1.0900
0.9174
0.0000
0.0000
1.1881
0.8417
0.4785
2.0900
0.5685
0.3951
1.7591
0.8417
0.4785
1.2950
0.7722
0.3051
3.2781
2.5313
2.3860
0.9426
4
1.4116
0.7084
0.2187
4.5731
0.3087
3.2397
4.5113
1.3925
1.5386
0.6499
0.1671
5.9847
0.2571
3.8897
7.1110
1.8282
6.
1.6771
0.5963
0.1329
7.5233
0.2229
4.4859
10.0924
2.2498](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5f3cee20-f091-47a8-bc70-8d141af0c480%2F5b7bb191-289c-46a6-8a6a-60b4bb6d5cfa%2Fsn2o8l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:i
9%
F/P
P/F
A/F
F/A
A/P
P/A
P/G
A/G
1
1.0900
0.9174
1.0000
1.0000
1.0900
0.9174
0.0000
0.0000
1.1881
0.8417
0.4785
2.0900
0.5685
0.3951
1.7591
0.8417
0.4785
1.2950
0.7722
0.3051
3.2781
2.5313
2.3860
0.9426
4
1.4116
0.7084
0.2187
4.5731
0.3087
3.2397
4.5113
1.3925
1.5386
0.6499
0.1671
5.9847
0.2571
3.8897
7.1110
1.8282
6.
1.6771
0.5963
0.1329
7.5233
0.2229
4.4859
10.0924
2.2498
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
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 4 steps with 3 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
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
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
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)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
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-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education