Question
Big-J Construction Company, Inc. is conducting a routine periodic review of existing field equipment. They use a MARR of 20%. This includes a replacement evaluation
Big-J Construction Company, Inc. is conducting a routine periodic review of existing field equipment. They use a MARR of 20%. This includes a replacement evaluation of a paving machine now in use. The machine was purchased 4 years ago for $200,000. The pavers current market value is $120,000, and yearly operating and maintenance costs are as follows.
| Year, n | Operating Cost in Years n | Maintenance Cost in Years n | Market Value if Sold in Year n |
| 1 | $15,0000 | $9,000 | $85,000 |
| 2 | $15,000 | $10,000 | $65,000 |
| 3 | $17,000 | $12,000 | $50,000 |
| 4 | $20,000 | $18,000 | $40,000 |
| 5 | $25,000 | $20,000 | $35,000 |
| 6 | $30,000 | $25,000 | $30,000 |
| 7 | $35,000 | $30,000 | $25,000 |
Data for a new paving machine have been analyzed. Its most economic life is at 8 years, with a minimum EUAC of $62,000. When should the existing paving machine be replaced?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Construction Contractors AICPA Audit And Accounting Guide
Authors: American Institute Of CPAs
1st Edition
0870519751, 978-0870519758
