A machinge has a first cost of $24,000. Its market value declines by 20% annually. The repair costs are covered by the warranty in Year 1, and then they increase $900 per year. The firm's MARR is 12%. Find the minimum EUAC for this machine and its economic life.

A machinge has a first cost of $24,000. Its market value declines by 20% annually. The repair costs are covered by the warranty in Year 1, and then they increase $900 per year. The firm's MARR is 12%. Find the minimum EUAC for this machine and its economic life.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 1.1CE: What life cycle cost concept begins raising concerns by year 5 with any electric vehicle (EV)? If...

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A machinge has a first cost of $24,000. Its market value declines by 20% annually.
The repair costs are covered by the warranty in Year 1, and then they increase
$900 per year. The firm's MARR is 12%. Find the minimum EUAC for this
machine and its economic life.

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Step 1: Define equivalent uniform annual cost(EUAC):

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Step 2: Calculate EUAC:

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Step 3: Calculate economic life.

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