A company is evaluating a possible replacement of an old machine that has been in use since it was purchased new for $40,000 on December 3, 2016. Today, howe the machine is worth $20,000. If this machine is kept, an engineer estimates that its Market Values will be $9,000 a year from now, and S8,000 two years from now. the other hand, Operating and Maintenance Costs are expected to be $5,000 for the upcoming year (until December 3, 2022) and $6,100 for the year after (until December 3, 2023). MARR is 10%. (a) The Annual Equivalent Cost if the machine is kept for one year (ie, until December 3, 2022) is $ (b) The Annual Equivalent Cost if the machine is kept for two years (i.e, until December 3, 2023) is $ (c) The Economic Service Life of the machine is • year(s). NOTE: Please enter your answers to parts (a) and (b) to two decimal places.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A company is evaluating a possible replacement of an old machine that has been in use since it was purchased new for $40,000 on December 3, 2016. Today, however,
the machine is worth $20,000. If this machine is kept, an engineer estimates that its Market Values will be $9,000 a year from now, and $8,000 two years from now. On
the other hand, Operating and Maintenance Costs are expected to be $5,000 for the upcoming year (until December 3, 2022) and $6,100 for the year after (until
December 3, 2023). MARR is 10%.
(a) The Annual Equivalent Cost if the machine is kept for one year (i.e, until December 3, 2022) is $
(b) The Annual Equivalent Cost if the machine is kept for two years (.e, until December 3, 2023) is $
(C) The Economic Service Life of the machine is
* year(s).
NOTE: Please enter your answers to parts (a) and (b) to two decimal places.
Transcribed Image Text:A company is evaluating a possible replacement of an old machine that has been in use since it was purchased new for $40,000 on December 3, 2016. Today, however, the machine is worth $20,000. If this machine is kept, an engineer estimates that its Market Values will be $9,000 a year from now, and $8,000 two years from now. On the other hand, Operating and Maintenance Costs are expected to be $5,000 for the upcoming year (until December 3, 2022) and $6,100 for the year after (until December 3, 2023). MARR is 10%. (a) The Annual Equivalent Cost if the machine is kept for one year (i.e, until December 3, 2022) is $ (b) The Annual Equivalent Cost if the machine is kept for two years (.e, until December 3, 2023) is $ (C) The Economic Service Life of the machine is * year(s). NOTE: Please enter your answers to parts (a) and (b) to two decimal places.
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