Question
The existing machine had an initial cost of $2,200 four years ago. Its useful life is 10 years and its salvage value at the end
The existing machine had an initial cost of $2,200 four years ago. Its useful life is 10 years and its salvage value at the end of its useful life is estimated as $200. Operating costs are $700 per year. This machine's present market value is $600. A replacement machine has an initial cost of $2,400, a useful life of 6 years, a salvage value of $300, and operating costs of $400 per year. If MARR is taken as 15%, should the existing machine be replaced by the replacement alternative? Use AE values in your analyses. a) Usethe"OutsiderViewpoint"method. b) Use the "Comparative Use Value" method. c) Usethe"ReceiptsandDisbursements"method.
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