A machine that costs $100,000 new can be replaced after being used from 4 to 7 years. Annual maintenance costs are identical for all possible replacement cycles. The machine

has a required return of 12% and the net salvage values at the end of 4 to 7 years of use are those given below. Ignoring taxes and inflation, what is the optimal replacement cycle?

A machine that costs $100,000 new can be replaced after being used from 4 to 7 years. Annual maintenance costs are identical for all possible replacement cycles. The machine has a required return of 12% and the net salvage values at the end of 4 to 7 years of use are those given below. Ignoring taxes and inflation, what is the optimal replacement cycle? Show your work and highlight your final answers. Number of years of use- Net salvage value $52,000 For the toolbar, press ALT+F10 (PC) or ALT+FN F10 (Mac) $38,000 6 $19,000 7 50