Question
A machine costs $20 000. The following information is also available. Running costs (payable at the end of the year): Year 1 5 000 Year
A machine costs $20 000. The following information is also available. Running costs (payable at the end of the year):
| Year 1 | 5 000 |
| Year 2 | 5 500 |
Trade-in allowance
Disposal after 1 year: 16 000
Disposal after 2 years: 13 000
Calculate the optimal replacement cycle if the cost of capital is 10%
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Modern Project Finance A Casebook
Authors: Benjamin C. Esty
1st Edition
0471434256, 978-0471434252
