An assembly operation at a software company now requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation. The robot will cost $200,000. Maintenance and operation expenses of the robot are estimated to be $64,000 per year for the first 2 years and $10,000 thereafter. Replacement of minimal parts will cost $5000 every 3 years. Invested capital must earn at least 12% per year. What is the capitalized cost? (Draw cash flow diagram and show complete solution)

An assembly operation at a software company now requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation. The robot will cost $200,000. Maintenance and operation expenses of the robot are estimated to be $64,000 per year for the first 2 years and $10,000 thereafter. Replacement of minimal parts will cost $5000 every 3 years. Invested capital must earn at least 12% per year. What is the capitalized cost? (Draw cash flow diagram and show complete solution)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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