1. Halcrow, Inc. expects to replace a downtime tracking system currently installed on CNC machines. The challenger system has a first cost of $70,000, an estimated AOC of $20,000 the first year increasing by 20% per year thereafter, a maximum useful life of 10 years, and a $10,000 market value after 1 year decreasing by 10% per year thereafter. (a) At an interest rate of 8% per year, determine the ESL and corresponding AW value for the challenger. (b) plot total AW from year 1 to 10 and determine the best year based on the lowest AW. (Solve by spreadsheet formula).
1. Halcrow, Inc. expects to replace a downtime tracking system currently installed on CNC machines. The challenger system has a first cost of $70,000, an estimated AOC of $20,000 the first year increasing by 20% per year thereafter, a maximum useful life of 10 years, and a $10,000 market value after 1 year decreasing by 10% per year thereafter. (a) At an interest rate of 8% per year, determine the ESL and corresponding AW value for the challenger. (b) plot total AW from year 1 to 10 and determine the best year based on the lowest AW. (Solve by spreadsheet formula).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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