DBS Builders Pte Ltd purchased an asphalt paver eight years ago for $280,000. The estimated operation and maintenance (O&M) costs for the next three years are $56,000, $68,000, and $82,000, respectively. The asphalt paver can be sold for $65,000 now, for $57,000 next year, for $45,000 two years from now, and for $28,000 three years from now. 4. The latest asphalt paver in the market costs $290,000 and has an estimated service life of five years. The salvage value is estimated to be $50,000 after five years. The expected annual O&M costs will be $6,000 for the first year and increase by $3,800 per year thereafter. If a before-tax minimum attractive rate of return (MARR) of 12% is estimated, what replacement decision should DBS Builders make?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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DBS Builders Pte Ltd purchased an asphalt paver eight years ago for $280,000. The estimated
operation and maintenance (O&M) costs for the next three years are $56,000, $68,000, and
$82,000, respectively. The asphalt paver can be sold for $65,000 now, for $57,000 next year, for
$45,000 two years from now, and for $28,000 three years from now.
4.
The latest asphalt paver in the market costs $290,000 and has an estimated service life of five
years. The salvage value is estimated to be $50,000 after five years. The expected annual O&M
costs will be $6,000 for the first year and increase by $3,800 per year thereafter.
If a before-tax minimum attractive rate of return (MARR) of 12% is estimated, what replacement
decision should DBS Builders make?
Transcribed Image Text:DBS Builders Pte Ltd purchased an asphalt paver eight years ago for $280,000. The estimated operation and maintenance (O&M) costs for the next three years are $56,000, $68,000, and $82,000, respectively. The asphalt paver can be sold for $65,000 now, for $57,000 next year, for $45,000 two years from now, and for $28,000 three years from now. 4. The latest asphalt paver in the market costs $290,000 and has an estimated service life of five years. The salvage value is estimated to be $50,000 after five years. The expected annual O&M costs will be $6,000 for the first year and increase by $3,800 per year thereafter. If a before-tax minimum attractive rate of return (MARR) of 12% is estimated, what replacement decision should DBS Builders make?
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