0&M Depreclation Engine Overhau] Market Value -5 -4 $2,858 --3 $4,898 -2 $3,498 -1 $2,500 $1,784 $2,500 $6,000 1 $5,000 $1,786 $4,500 2 $5,500 $1,840 $3,500 3 $6,000 $892 $3,000 4 $6,500 $0 $3,000 $2,500 5 $7,500 $0 $2,000
A firm is considering the replacement of a 2,000 lb capacity pressing machine purchased five years ago at a cost of $22,000. The machine was originally expected to have a useful life of 10 years and a $2,000 estimated salvage value at the end of that period. However, the machine has not been dependable and is frequently out of service while awaiting repairs. The maintenance expenses of the pressing machine have been rising steadily and currently amount to about $5,000 per year. The machine could be sold now for $6,000. If retained, the machine will require an immediate $2,500 overhaul to keep it in operable condition. This overhaul will neither extend the originally estimated service life nor increase the value of the machine. The updated annual operating costs, engine overhaul cost, and market values over the next five years are estimated as follows:
A drastic increase in operating costs during the fourth year is expected as a
result of another overhaul, which will be required to keep the machine in operating condition. The firm's MARR is 15%.
(a) If the machine is to be sold now, what will be its sunk cost?
(b) What is the
(c) What is the equivalent annual cost of owning and operating the machine for two more years?
(d) What is the equivalent annual cost of owning and operating the machine for five more years?
![0&M
Depreclation
Engine Overhau] Market Value
-5
-4
$2,858
--3
$4,898
-2
$3,498
-1
$2,500
$1,784
$2,500
$6,000
1
$5,000
$1,786
$4,500
2
$5,500
$1,840
$3,500
3
$6,000
$892
$3,000
4
$6,500
$0
$3,000
$2,500
5
$7,500
$0
$2,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F45853372-babe-4d35-8c29-069a987c5c76%2F47a04995-239e-43ca-8e8f-6b0ba34c3c43%2Flr1osu9_processed.png&w=3840&q=75)
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