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Practice problems (11/01/2018) 1) A West Virginia coal mining operation has installed an in-shaft monitoring system for oxygen tank and gear readiness for emergencies. Based
Practice problems (11/01/2018) 1) A West Virginia coal mining operation has installed an in-shaft monitoring system for oxygen tank and gear readiness for emergencies. Based on maintenance patterns for previous systems, costs are minimal for the first few years, increase for a time period, and then level off. Maintenance costs are expected to be $150,000 in year 3, $175,000 in year 4, and amounts increasing by $25,000 per year through year 6 and remain constant thereafter for the expected 10-year life of this system. If similar systems will replace the current one, determine the perpetual equivalent annual maintenance cost at-10% per year. 2) A major repair on the suspension system of Jane's 3-year old car cost her $2,000 because the warranty expired after 2 years of ownership. Based on this experience, she will plan on additional $2000 expenses every 3 years henceforth. Also, she spends $800 every 2 years for maintenance now that the warranty is over. This is for years 2, 4, 6, 8, and 10 when she plans to donate the car to charity. Use these costs to determine Jane's equivalent perpetual annual cost (for years 1 through infinity) at i: 5% per year, if cars she owns in the future have the same cost pattern
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