Assume the MARR is 10% per year for this analysis. A presently owned machine that was purchased 8 years ago for $450,000 is under consideration for replacement. It has an annual operating cost of $120,000 per year and a salvage value of $40,000 whenever it is replaced. The challenger has a first cost of $670,000, an expected annual operating cost of $94,000, and a salvage value of $60,000 after its 10-year economic life. The breakeven market value of the presently owned machine required to make the AW values of the two machines the same, if the presently owned machine is kept for 5 more years and then replaced with the challenger that has the same AW, is closest to: (a) $196,340 (b) $255,390 (c) $325,360 (d ) $394,770
Assume the MARR is 10% per year for this analysis.
A presently owned machine that was purchased
8 years ago for $450,000 is under consideration for
replacement. It has an annual operating cost of
$120,000 per year and a salvage value of $40,000
whenever it is replaced. The challenger has a first
cost of $670,000, an expected annual operating
cost of $94,000, and a salvage value of $60,000
after its 10-year economic life. The breakeven
market value of the presently owned machine required
to make the AW values of the two machines
the same, if the presently owned machine is kept
for 5 more years and then replaced with the challenger
that has the same AW, is closest to:
(a) $196,340 (b) $255,390
(c) $325,360 (d ) $394,770
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