A West Virginia coal mining operation has installed an in-shaft monitoring system for oxygen tank and gear readiness for emergencies. Based on maintenance patterns for previous systems, costs are minimal for the first few years, increase for a time period, and then level off. Maintenance costs are expected to be $150,000 in year 3, $175,000 in year 4, and amounts increasing by $25,000 per year through year 6 and remain constant thereafter for the expected 10-year life of this system. If similar systems will replace the current one, determine the perpetual equivalent annual maintenance cost at i = (2+x) % per year.
A West Virginia coal mining operation has installed an in-shaft monitoring system for oxygen tank and gear readiness for emergencies. Based on maintenance patterns for previous systems, costs are minimal for the first few years, increase for a time period, and then level off. Maintenance costs are expected to be $150,000 in year 3, $175,000 in year 4, and amounts increasing by $25,000 per year through year 6 and remain constant thereafter for the expected 10-year life of this system. If similar systems will replace the current one, determine the perpetual equivalent annual maintenance cost at i = (2+x) % per year.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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. A West Virginia coal mining operation has installed an in-shaft monitoring system for
oxygen tank and gear readiness for emergencies. Based on maintenance patterns for previous
systems, costs are minimal for the first few years, increase for a time period, and then level off.
Maintenance costs are expected to be $150,000 in year 3, $175,000 in year 4, and amounts
increasing by $25,000 per year through year 6 and remain constant thereafter for the expected
10-year life of this system. If similar systems will replace the current one, determine the
perpetual equivalent annual maintenance cost at i = (2+x) % per year.
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