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A crashing machine that is a basic component of a metal recycling operation is wearing out faster than expected. The machine was purchased 2 years ago for $400,000. At that time, the buyer thought the machine would serve its needs for at least 5 years, at which time the machine would be sold to a smaller independent recycler for $30,000. Now, however, the company thinks the market value of the diminished machine is only $50,000. If it is kept, the machine's operating cost will be $37,000 per year for the next 2 years, after which it will be scrapped for $1000. If it is kept for only 1 year, the market value is estimated to be $10,000. Altema- tively, the company can of nice the process now for a fixed cost of $56,000 per year. At an interest rate of 10%% per year, should the company continue with the current machine or o arce the process? The data associated with operating and maintain- ing an asset are shown below. The company man- ager has already decided to keep the machine for I more year (ie., until the end of year 1), but you have been asked to determine the cost of keeping it more year after that. At an interest rate of 10% ber year, estimate the AW of keeping the machine from year I to year 2. Operating Cost. Year Market Value, $ $ per Year 30,000 -15,000 25,000 -15,000 14,000 -15,000 10,000 -15,000Keep or Replace the Kiln Case PE In Example 1 1.8, the in-place kiln and replacement killm (GH) were evaluated using a fixed study pe- riod of & years. This is a significantly shortened period compared to the expected 12-year life of the challenger. Use the best estimates available throughout this case to determine the impact on the capital recovery amount for the GH kiln of short- ening the evaluation time from 12 to 6 years. Nabisco Bakers currently employs staff to operate the equipment used to sterilize much of the mixing, baking, and packaging facilities in a large cookie and cracker manufacturing plant in lowa. The plant manager, who is dedicated to cutting costs but not sacrificing quality and hygiene, has the projected data shown in the table below if the current system were retained for up to its maximum expected life of 3 years. A contract company has proposed a turnkey sanitation system for $5 0 million per year if Nabisco signs on for 4 to 10 years, and $5.$ mil- ion per year for a shorter number of years. Retained AM, $ per Year Close.Down Expense, $ -3,000,000 -2,300,000 -2 500,000 -2,300,000 -2 000,000 -3,000,000 -1,000 00D -3,000,000 -1,000,000 -3 5001000 -500,000 (4) At a MARR = 8% per year, perform a re- placement study for the plant manager with fixed study period of 3 years, when it is an- ticipated that the plant will be shut down due to the age of the facility and projected tech- nological obsolescence. As you perform the study, take into account that regardless of the number of years that the current sanitation system is retained, a one-time close-downThe annual worth values for a defender, which can be replaced with a similar used asset, and a chal. lenger are estimated. The defender should be re- placed: [a) Now (b) I year from now (c) 2 years from now () 3 years from now Number of AW Value, $ per Year Years Retained Defender Challenger -14,000 -21,000 OnC'EI- -16,900 -13,100 -17,000 -15 600 -18,000 - IT SOO\fFor equipment that has a first cost of $10 000 and the estimated operating costs and year-end salvage values shown below, determine the economic ser- vice life at f = 10% per year Operating Cost, Salvage Year $ per Year Value, $ - 1030 7000 - 1700 5000 - 1300 4500 -2000 3000 2000 To improve package tracking at a UPS transfer fa- cility, conveyor equipment was upgraded with RFID sensors at a cost of $345,000. The operating cost is expected to be $148 000 per year for the first 3 years and $210,000 for the next 3 years. The salvage value of the equipment is expected to be $140,000 for the first 3 years, but due to obsoles- cence, it won't have a significant value after that. At an interest rate of 10% per year, determine (al The economic service life of the equipment and associated annual worth (b) The percentage increase in the AW of cost if the equipment is retained 2 years longer than the ESL