Doe must choose between two different models. The analysis period considered is 6 years. Model 1 has a life of four years with a first cost of $13,500 and maintenance costs of $1,250 per year in years 2, 3, and 4 (no maintenance costs in year 1). The salvage value for this model at the end of its life is $4,271 (For year 2 the salvage value is $7,594). Model 2 has a life of three years with a first cost of $15,000 and maintenance costs of $700 per year. Its salvage value at the end of its life is $9,300 (year 3). Which of the two models should be chosen by J. Doe if considering a MARR of 12%
Doe must choose between two different models. The analysis period considered is 6 years. Model 1 has a life of four years with a first cost of $13,500 and maintenance costs of $1,250 per year in years 2, 3, and 4 (no maintenance costs in year 1). The salvage value for this model at the end of its life is $4,271 (For year 2 the salvage value is $7,594). Model 2 has a life of three years with a first cost of $15,000 and maintenance costs of $700 per year. Its salvage value at the end of its life is $9,300 (year 3). Which of the two models should be chosen by J. Doe if considering a MARR of 12%
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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J. Doe must choose between two different models. The analysis period considered is 6
years. Model 1 has a life of four years with a first cost of $13,500 and maintenance
costs of $1,250 per year in years 2, 3, and 4 (no maintenance costs in year 1). The
salvage value for this model at the end of its life is $4,271 (For year 2 the salvage value
is $7,594).
Model 2 has a life of three years with a first cost of $15,000 and maintenance costs of
$700 per year. Its salvage value at the end of its life is $9,300 (year 3).
Which of the two models should be chosen by J. Doe if considering a MARR of 12%.
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