1. Unlike standard life cycle cost analysis, the Estimated Uniform Annual Cost (EUAC)

method expresses life cycle costs as an annualized estimate of cash flow instead of a

lumpsum estimate of present value.

(a)An existing machine in a factory has an annual maintenance cost of RM 40,000. A new

and more efficient machine will require an investment of RM 90,000 and is estimated to

have a salvage value of RM 30,000 at the end of 8 years. Its annual expenses for

maintenance and upkeep, etc. overall total is RM 22,000. If the company expects to earn

12% on its investment, will it be worthwhile to purchase the new machine?

( 10 )

(b)A construction company plans to purchase new cut-and-finish equipment. Two

manufacturers offered the estimates as in Table 1 below. Determine which company

should be selected on the basis of present worth comparison, if the MARR is 15% per

year.

Table 1 / Jadual 1

Company X

Company Y

First cost / Kos pertama

15000

18000

Annual cost / Kos

tahunan

3500

3100

Salvage value / Nilai

penyelamatan

1000

2000

Life, years / Hayat, tahun

6

9

( 10 )