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DO NOT USE EXCEL USE TABULATED FACTORS AND SHOW CASHFLOW DIAGRAM BE CLEAN IN SHOWING WORK The Acme Company plans to acquire a new unit

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DO NOT USE EXCEL

USE TABULATED FACTORS AND SHOW CASHFLOW DIAGRAM

BE CLEAN IN SHOWING WORK

The Acme Company plans to acquire a new unit of production equipment that will require the following maintenance Routine maintenance - every 3 months at a cost of $1000 Major overhaul - every 6 months, at a cost of $100,000 The Acme Company plans to use this equipment for 2 years, and maintenance costs will be incurred every time period except the last. Thus, routine maintenance costs will be incurred at months 3, 6, 9, 12, 15, 18 and 21. Major overhaul costs will be incurred at months 6, 12, and 18. Suppose that all maintenance can be outsourced to another company specializing in the repair of this equipment. This outsourcing will cost a flat $/year fee payable at the start of each year li.e., at t = 0 and 1 year). Note that this $/year fee remains constant over both payments. Given that the Acme Company has a MARR of 3%/quarter, what is the most that the Acme Company should pay for outsourcing the maintenance work? Please express your answer as the $ amount due at each oft - O, and 1 year

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