4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5 years. The machine needs to be maintained at an annual cost of $2000. The machine has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%. (a) Draw the cash flow diagram. b) Determine the equivalent present and annual revenue of the machine. c) Determine the annual cost of owning the machine. d) Determine if this is a good investment using AE.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash
flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5
years. The machine needs to be maintained at an annual cost of $2000. The machine
has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%.
(a) Draw the cash flow diagram. b) Determine the equivalent present and annual
revenue of the machine. c) Determine the annual cost of owning the machine. d)
Determine if this is a good investment using AE.
Transcribed Image Text:4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5 years. The machine needs to be maintained at an annual cost of $2000. The machine has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%. (a) Draw the cash flow diagram. b) Determine the equivalent present and annual revenue of the machine. c) Determine the annual cost of owning the machine. d) Determine if this is a good investment using AE.
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