Machine J has a first cost of $50,000, an estimated service period of 12 years, and an estimated salvage value of $14,000 at the end of the 12 years. Estimated annual disbursements for operations and maintenance are $6,000 for the first year, $6,300 for the second year, and will increase $300 each year thereafter. An alternate is Machine K, which has a first cost of $30,000 and an estimated zero salvage value at the end of the 12- year service period. Estimated annual disbursements for operation and maintenance are $8,000 for the first year, $8,500 the second year, and will increase $500 each year thereafter. Estimated extra income taxes with Machine J are $750 the first year, $850 the second, and will increase $100 each year thereafter. Using an after-tax i* of 12% compare the equivalent uniform annual cost of a 12-year service from Machines J and K.

Machine J has a first cost of $50,000, an estimated service period of 12 years, and an estimated salvage value of $14,000 at the end of the 12 years. Estimated annual disbursements for operations and maintenance are $6,000 for the first year, $6,300 for the second year, and will increase $300 each year thereafter. An alternate is Machine K, which has a first cost of $30,000 and an estimated zero salvage value at the end of the 12- year service period. Estimated annual disbursements for operation and maintenance are $8,000 for the first year, $8,500 the second year, and will increase $500 each year thereafter. Estimated extra income taxes with Machine J are $750 the first year, $850 the second, and will increase $100 each year thereafter. Using an after-tax i* of 12% compare the equivalent uniform annual cost of a 12-year service from Machines J and K.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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