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The textbook solution wasn't actually correct. so any help would be appreciated 5 A firm is considering the replacerment ol a 2,000 lb capacity pressing
The textbook solution wasn't actually correct. so any help would be appreciated
5 A firm is considering the replacerment ol a 2,000 lb capacity pressing machine purchased fve years ago at a cost of S22,000 The machirie was originally expected to have a useful lile ol 10 years and a $2,000 estimated salvage value at the end of that period. However, the machine has not been dependable and is frequently out of service while awaiting repairs. The maintenance expenses of the pressing machine have been rising steadily and currently amount to about S5,000 per year. The machine could be sold now for $6,000. If retained, the machine will require an immediate S2,500 overhaul to keep it in operable condition. This overhaul will neither extend the originally estimated service life nor increase the value of the machine. The updated annual operating costs, engine overhaul cost, and market values over the next five years are estimated as follows O&M Depreciation Engine Overhaul Market Value -5 $2,858 $4,898 $3,498 $2.500 $1,784 $1,786 $1,840 $892 60 $0 -4 $6,000 $4.500 %3.500 $3,000 $2,500 $2,000 $2,500 1 $5,000 2 $5,500 3 $6,000 4 $6,500 5 $7,500 3.000 A draslic increase in operaling cosls during the fourth year is expecled as a resull of anolher overhaul, which will be required lo keep the machine in operating condition The firm's MARR is 15% a. If the machine is to be sold now, what will be its sunk cost? b. What is the opportunity cost of not replacing the machine now? C. What is the equivalent annual cost of owning and operating the machine for two more years? d. What is the equivalent annual cost of owning and operating the machine for five more yearsStep by Step Solution
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