Four years ago, a firm purchased an industrial batch oven for $23,000. The oven had an estimated life of IO years with $1,000 salvage value. These original estimates are still good. If sold now, the machine will bring in $2,000. If sold at the end of the year, it will bring in $1,500. The market value after the first year has decreased at annual rate of 25%. Annual operating costs for subsequent years are $3,800. A new machine will cost $50,000 and have a 12-year life with a $3,000 salvage value. The operating cost for the new machine will be $3,000 as of the end of each year, where the $6,000-per-year savings are due to better quality control. If the firm's MARR is 10%, should the new machine be purchased now?
Four years ago, a firm purchased an industrial batch oven for $23,000. The oven had an estimated life of IO years with $1,000 salvage value. These original estimates are still good. If sold now, the machine will bring in $2,000. If sold at the end of the year, it will bring in $1,500. The market value after the first year has decreased at annual rate of 25%. Annual operating costs for subsequent years are $3,800. A new machine will cost $50,000 and have a 12-year life with a $3,000 salvage value. The operating cost for the new machine will be $3,000 as of the end of each year, where the $6,000-per-year savings are due to better quality control. If the firm's MARR is 10%, should the new machine be purchased now?
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