Question
A tomato-peeling machines purchased 5 years ago for $60,000 can be sold today for $12,000. It is estimated that the market value of this machine
A tomato-peeling machines purchased 5 years ago for $60,000 can be sold today for $12,000. It is estimated that the market value of this machine will decrease by $1,000 per year over the next 5 years. Maintenance and operating expenses in the past have been $20,000 per year, but these are estimated to increase in the future by $1,000 per year each year. Annual insurance in the past have been $50 per year, and these are estimated to increase in the future by $10 per year each year. Now, the company is going to replace this old machine by the machine A (in Question 1) which has a market value as follows Year Market value 1 $42,000 2 $32,000 3 $25,000 4 $20,000 5 $18,000 If the MARR used by the company is 10%, use replacement analysis technique 1 to analyze this replacement, what will you recommend the company?
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