The first item on the equipment list cost $18000
Using the first item of equipment from the equipment list, perform a replacement analysis with the following assumptions: 1. Salvage value decreases by 15% every year. 2. Manufactuer's warranty will cover the first year of maintenance. 3. Maintenance will cost 2% of the intial cost in the second year and will increase 4.5% each year thereafter in an geometric gradient. 4. Operating expense for the machinery will be 1.5% of the initial cost for the first year and will increase on a 1.5% of the intial cost arithemtic gradient each year. 5. Assume 6.5% interest. Interest SV decrease Init cost maint maint EUAC of Salvage Value Capital Costs Year Maintenance PW of Cash Flow Maintenance Operating cost cash Sum of PW Maintenance PW of Operating Sum of PW EUAC of Operating 1 2 Deliverables EUAC of Capital Costs for 18 years EUAC of Maintenance Costs for 18 years EUAC of Operating costs for 18 years When would be best to replace the equipment? 5 61 loloova Helpful Table Intial Maintenance Cost (2% of the initial equipment cost) EUAC Total $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Intial Operating Cost (1.5% of the initial equipment cost) First Year Annual Operating Cost Increase (1.5% of the intial equipment cost) - - - 10 11 12 13 144 15 16 17 - 18 Using the first item of equipment from the equipment list, perform a replacement analysis with the following assumptions: 1. Salvage value decreases by 15% every year. 2. Manufactuer's warranty will cover the first year of maintenance. 3. Maintenance will cost 2% of the intial cost in the second year and will increase 4.5% each year thereafter in an geometric gradient. 4. Operating expense for the machinery will be 1.5% of the initial cost for the first year and will increase on a 1.5% of the intial cost arithemtic gradient each year. 5. Assume 6.5% interest. Interest SV decrease Init cost maint maint EUAC of Salvage Value Capital Costs Year Maintenance PW of Cash Flow Maintenance Operating cost cash Sum of PW Maintenance PW of Operating Sum of PW EUAC of Operating 1 2 Deliverables EUAC of Capital Costs for 18 years EUAC of Maintenance Costs for 18 years EUAC of Operating costs for 18 years When would be best to replace the equipment? 5 61 loloova Helpful Table Intial Maintenance Cost (2% of the initial equipment cost) EUAC Total $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Intial Operating Cost (1.5% of the initial equipment cost) First Year Annual Operating Cost Increase (1.5% of the intial equipment cost) - - - 10 11 12 13 144 15 16 17 - 18
