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Q2 The annual maintenance cost of an existing cooling device is currently $1900 and will increase by $1900 every year thereafter. The device is very old and therefore has negligible salvage value. The purchase cost for a proposed replacement device is $8000. The initial annual maintenance cost for the new device is $800. The annual maintenance cost of the new device will increase by $800 every year thereafter. The resell value of the new device depreciates at a rate of 30% per year. The MARR (minimum acceptable rate of return) for the company of concern is 5%. (a) Determine the optimal time to replace the existing device with the new device. (b) Explain, giving reasons, how you would expect the optimal replacement time to change if the company's MARR was higher. Also comment on the implications for green technology uptake in different industrial sectors.

Q2 The annual maintenance cost of an existing cooling device is currently $1900 and will increase by $1900 every year thereafter. The device is very old and therefore has negligible salvage value. The purchase cost for a proposed replacement device is $8000. The initial annual maintenance cost for the new device is $800. The annual maintenance cost of the new device will increase by $800 every year thereafter. The resell value of the new device depreciates at a rate of 30% per year. The MARR (minimum acceptable rate of return) for the company of concern is 5%. (a) Determine the optimal time to replace the existing device with the new device. (b) Explain, giving reasons, how you would expect the optimal replacement time to change if the company's MARR was higher. Also comment on the implications for green technology uptake in different industrial sectors.

Applications and Investigations in Earth Science (9th Edition)
Applications and Investigations in Earth Science (9th Edition)
9th Edition
ISBN:9780134746241
Author:Edward J. Tarbuck, Frederick K. Lutgens, Dennis G. Tasa
Publisher:Edward J. Tarbuck, Frederick K. Lutgens, Dennis G. Tasa
Chapter1: The Study Of Minerals
Section: Chapter Questions
Problem 1LR
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Q2 The annual maintenance cost of an existing cooling device is currently $1900 and will increase by $1900 every year thereafter. The device is very old and therefore has negligible salvage value. The purchase cost for a proposed replacement device is $8000. The initial annual maintenance cost for the new device is $800. The annual maintenance cost of the new device will increase by $800 every year thereafter. The resell value of the new device depreciates at a rate of 30% per year. The MARR (minimum acceptable rate of return) for the company of concern is 5%. (a) Determine the optimal time to replace the existing device with the new device. (b) Explain, giving reasons, how you would expect the optimal replacement time to change if the company's MARR was higher. Also comment on the implications for green technology uptake in different industrial sectors.
Transcribed Image Text:Q2 The annual maintenance cost of an existing cooling device is currently $1900 and will increase by $1900 every year thereafter. The device is very old and therefore has negligible salvage value. The purchase cost for a proposed replacement device is $8000. The initial annual maintenance cost for the new device is $800. The annual maintenance cost of the new device will increase by $800 every year thereafter. The resell value of the new device depreciates at a rate of 30% per year. The MARR (minimum acceptable rate of return) for the company of concern is 5%. (a) Determine the optimal time to replace the existing device with the new device. (b) Explain, giving reasons, how you would expect the optimal replacement time to change if the company's MARR was higher. Also comment on the implications for green technology uptake in different industrial sectors.
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