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Question 6.1 (10pts) A company invests in a manufacturing robot $25,000 with the intention to use it for five years. The robot had an
Question 6.1 (10pts) A company invests in a manufacturing robot $25,000 with the intention to use it for five years. The robot had an operating cost of $2,000 per year and its salvage value at the end of 5 years is $10,000. At the end of the previously expected useful life (at n = 5), the maintenance engineer suggests that if a major maintenance cost of $5,000 is spent now, the company will be able to use the robot for 3 more years (until the end of n = 8). Although annual operating costs will not change, robot's salvage value will decline to $7,000 after 3 years. How much would the annual equivalent cost of owning and operating the robot change if the company decides to use the robot for three more years considering that the discount rate is 15%? A) Decrease by $1,213 B) Decrease by $659 C) Increase by $567 D) Answers A, B and C are not correct
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