Milliken uses a digitally controlled dyer for placing intricate patterns on manufactured carpet squares for home and commercial use. It is purchased for $400,000. Its market value will be $310,000 at the end of the 1st year and drop by $50,000 per year thereafter to a minimum of $30,000. Operating costs are $20,000 the 1st year, increasing by 8% per year. Maintenance costs are only $8,000 the 1st year but will increase by 38% each year thereafter. Milliken's MARR is 18%. Determine the optimum replacement interval for the dyer. Year(s) Carry all interim calculations to 2 decimal places and then round your final answer to the nearest year. No tolerance available.

Milliken uses a digitally controlled dyer for placing intricate patterns on manufactured carpet squares for home and commercial use. It is purchased for $400,000. Its market value will be $310,000 at the end of the 1st year and drop by $50,000 per year thereafter to a minimum of $30,000. Operating costs are $20,000 the 1st year, increasing by 8% per year. Maintenance costs are only $8,000 the 1st year but will increase by 38% each year thereafter. Milliken's MARR is 18%. Determine the optimum replacement interval for the dyer. Year(s) Carry all interim calculations to 2 decimal places and then round your final answer to the nearest year. No tolerance available.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.2CE

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