Question
A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking nice year round. A used cleaning vehicle will
A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking nice year round. A used cleaning vehicle will cost $85,000 and have a $18,000 market (salvage) value at the end of its five-year life. A new system with advanced features will cost $175,000 and have a $58,000 market value at the end of its five-year life. The new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity requires the used system to operate 8 hours per day for 25 days per month. Labor costs $45 per hour (including fringe benefits), and MARR is 12% per year compounded monthly. Find the breakeven percent reduction in labor hours for the new system.
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