The replacement of a laser cutting machine is being considered. The best available machine on market has an estimated economic life of 12 years with an equivalent annual worth of S-24,800. The current used machine, which was bought six years ago for $48.000, has a present market value of $4,000 with the following data for the next three years: OC Estim ated Market Value Year S per Year at End of Year, S 20,000 3,000 25,000 2,500 30,000 2,000 Select when to replace the machine, using Economic Service Life method at an interest rate of 4% per year. O a) Replace now O b) Replace in year one O c) Replace in year two O d) Replace in year three
The replacement of a laser cutting machine is being considered. The best available machine on market has an estimated economic life of 12 years with an equivalent annual worth of S-24,800. The current used machine, which was bought six years ago for $48.000, has a present market value of $4,000 with the following data for the next three years: OC Estim ated Market Value Year S per Year at End of Year, S 20,000 3,000 25,000 2,500 30,000 2,000 Select when to replace the machine, using Economic Service Life method at an interest rate of 4% per year. O a) Replace now O b) Replace in year one O c) Replace in year two O d) Replace in year three
Chapter1: Making Economics Decisions
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Transcribed Image Text:The replacement of a laser cutting machine is being considered. The best available machine on market has an estimated economic life of 12 years with an equivalent annual worth of S-24,800. The current used machine, which was bought six years ago
for $48.000, has a present market value of $4,000 with the following data for the next three years:
OC
Estimated Market Value
Year
S per Year
at End of Year, S
20,000
3,000
2
25,000
2,500
3
30,000
2,000
Select when to replace the machine, using Economic Service Life method at an interest rate of 4% per year
O a) Replace now
O b) Replace in year one
O c) Replace in year two
O d) Replace
year three
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