Polaris Industries wishes to purchase a multiple-use in-plant ‘‘road test’’ simulator that can be used for ATVs, motorcycles, and snowmobiles. It takes digital data from relatively short drives on a desired surface—from smooth to exceptionally harsh—and simulates the ride over and over while the vehicle is mounted to a test stand under load. It can run continuously if desired and provides opportunities to redesign areas of poor reliability. It costs $128,000, and its market value decreases by 30 percent each year. Operating costs are modest; however, maintenance costs can be significant due to the rugged use. O&M in the first year is expected to be $10,000, increasing by 25 percent each subsequent year. MARR is 15 percent. What is the optimum replacement interval?
Polaris Industries wishes to purchase a multiple-use in-plant ‘‘road test’’ simulator that can be used for ATVs, motorcycles, and snowmobiles. It takes digital data from relatively short drives on a desired surface—from smooth to exceptionally harsh—and simulates the ride over and over while the vehicle is mounted to a test stand under load. It can run continuously if desired and provides opportunities to redesign areas of poor reliability. It costs $128,000, and its market value decreases by 30 percent each year. Operating costs are modest; however, maintenance costs can be significant due to the rugged use. O&M in the first year is expected to be $10,000, increasing by 25 percent each subsequent year. MARR is 15 percent. What is the optimum replacement interval?
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