One year ago, a machine was purchased at a cost of $2,000, to be useful for 6 years. However, the machine has failed to perform properly and has a cost of $500 per year for repairs, adjustments, and shutdowns. A new machine is available to accomplish the functions desired and has an initial cost of $3,500. Its maintenance costs are expected to be $50 per year during its service life of 5 years. The approximate market value of the present machine has been roughly $1,200. If the operating costs (other than maintenance) for both machines are equal, show whether it is economical to purchase the new machine. Perform a Replacement study using an interest rate of 12%, and assume that the salvage values will be negligible.
One year ago, a machine was purchased at a cost of $2,000, to be useful for 6 years. However, the machine has failed to perform properly and has a cost of $500 per year for repairs, adjustments, and shutdowns. A new machine is available to accomplish the functions desired and has an initial cost of $3,500. Its maintenance costs are expected to be $50 per year during its service life of 5 years. The approximate market value of the present machine has been roughly $1,200. If the operating costs (other than maintenance) for both machines are equal, show whether it is economical to purchase the new machine. Perform a Replacement study using an interest rate of 12%, and assume that the salvage values will be negligible.
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)