how to calculate the market value in the table? please show details, thanks! EXAMPLE 13-2A new piece of production machinery has the following costs.Investment cost= $25,000Annual operating and maintenance cost = $2,000 in Year 1, then increasing by $500 per yearAnnual cost for risk of breakdown= $5,000 per year for 3 years, then increasing by $1,500 per year=7 years= 15%Useful lifeMARRCalculate the marginal cost of keeping this asset over its useful life.SOLUTIONFrom the data we can easily find the marginal costs for O&M and risk of breakdowns. However, tocalculate the marginal capital recovery cost, we need estimates of each year's market value:YearMarket Value1$18,000213,00039,00046,0004,0003,00072,500

Investment cost = $25,000 Annual operating and maintenance cost = $2,000 in Year 1, then increasing…

From the data we can easily find the marginal costs for 0&M and risk of breakdowns. However, to calculate the marginal capital recovery cost, we need estimates of each year's market value: Year Market Value 1 $18,000 2 13,000 3 9,000 4 6,000 4,000 6. 3,000 7 2,500

From the data we can easily find the marginal costs for 0&M and risk of breakdowns. However, to calculate the marginal capital recovery cost, we need estimates of each year's market value: Year Market Value 1 $18,000 2 13,000 3 9,000 4 6,000 4,000 6. 3,000 7 2,500

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 12PROB

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