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Question 4 : Please don't use excel, solve by hand, using formula and step wise. Again remember, Don't use Excel. 4. A diesel engine was
Question 4 : Please don't use excel, solve by hand, using formula and step wise.
Again remember, Don't use Excel.
4. A diesel engine was installed 10 years ago at a cost of Rs. 50,000. It has a present realizable market value of Rs. 15,000. If kept, it can be expected to last five years more, with operating and maintenance cost of Rs. 14,000 per year and to have a salvage value of Rs. 8,000 at the end of the fifth year. This engine can be replaced with an improved version costing Rs. 65,000 which has an expected life of 20 years. This improved version will have an estimated annual operating and maintenance cost of Rs. 9,000 and ultimate salvage value of Rs. 13,000. Using an interest rate of 15%, make an annual equivalent cost analysis to determine whether to keep or replace the old engine. nieStep by Step Solution
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