Question
A proposed satellite tracking facility has a projected life of 35 years. Two options for an azimuth motor for the facility are being considered. Option
A proposed satellite tracking facility has a projected life of 35 years. Two options for an azimuth motor for the facility are being considered.
Option 1: Purchase Ajax Motor that costs $12,000 and has useful life of 5 years before needing to be replaced with another Ajax Motor. The Ajax Motor has zero salvage value. The annual Operation and Maintenance cost associated with Option 1 is $2500.
Option 2: Purchase Acme Motor that costs $40,000 and has a useful life of 7 years before needing to be replaced with another Acme Motor. The Acme Motor has a salvage value of $10,000. The annual Operation and Maintenance cost associated with Option 2 is $1000.
What is the Present Equivalent Cost of both options over the projected 35-year life of the facility? Assume 15% interest rate.
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