Question
General Food Company is considering replacing an old food dispenser which was purchased 10 years ago at a cost of $26,000. It has a current
General Food Company is considering replacing an old food dispenser which was purchased 10 years ago at a cost of $26,000. It has a current market value of $6000. If the firm spends $2000 to recalibrate the dispenser, it would extend the life of the dispenser for another three years with the following estimated market values and operating costs: Year 0: Market value $6000; Overhaul $2000 Year 1: Market value $4300; O&M cost $3800 Year 2: Market value $2500; O&M cost $5100 Year 3: Market value $1000; O&M cost $6500 The firm`s MARR is 10%. Ignore any income tax effects for this problem. What is the remaining economic service life of the machine with the overhaul? Hint: consider the overhaul as one-time O&M cost in year 0. Enter your answer as an integer between 1 and 3.
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