Five machines were originally estimated to have useful life of twelve years. If sold now, each can be sold for P5,500. The annual operating costs for each are one operator at P22.00 a day, 300 days a year; a yearly energy utilization is 6,000 kw-hr at P0.50 per kw-hr; upkeep including spare parts are estimated P700 a year. Taxes and insurance are 7% of first cost. The machine

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Chapter1: Making Economics Decisions
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Five machines were originally estimated to have useful life of twelve years. If sold now, each can be sold for P5,500. The annual operating costs for each are one operator at P22.00 a day, 300 days a year; a yearly energy utilization is 6,000 kw-hr at P0.50 per kw-hr; upkeep including spare parts are estimated P700 a year. Taxes and insurance are 7% of first cost. The machine has the same capacity as the fivbe machines and is now available at an estimated first cost including installation of P80, 000. Sinking fund method is used at 15% in computation od depreciation. Will you recommend replacement
if money is worth 20% to a company?

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