Maria has a washing machine that she has been using for 2 years, and she thinks the washing machine will work for 13 years more if serviced for amount of A ($) each year.

Maria is also considering to buy a new washing machine instead of using the old.

The new washing machine has a useful life of 13 years and it has the following details.

• Initial Cost= 5500$

• Salvage Value = 1500$

• Annual maintenance cost

First 8 years =275$

After 8th year = 415$

• Interest rate

for the first 5 years = 7%

for the next 8 years= 8%

How much should the annual maintenance cost (A$) of the existing washing machine be at least so that buying and using the new washing machine can be more attractive?

Solve in details