Question
Please I need help with this, I've been trying to solve it for three days now and I couldn't solve it: An existing drill press
Please I need help with this, I've been trying to solve it for three days now and I couldn't solve it:
An existing drill press has a salvage value now of $5000, which will fall to $4000 by the end of the year. The cost of lower productivity using this drill press is $3000 this year. A new-fangled drill press, being considered as a replacement, has the following salvage values and loss of productivity:
Year
Salvage
Productivity Loss
0
$12,000
1
$9000
$0
2
$7000
$1000
3
$5000
$2000
4
$3000
$3000
Assume an interest rate of 15%. Calculate the EUAC for each year of the new-fangled drill press. Calculate the marginal cost of the existing drill press. In what year does the new-fangled drill press' EUAC fall below the marginal cost of the existing drill press and what is the amount of the new-fangled drill press' EUAC of that year?
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