A machine cost $30,000 initially and has no salvage value. The O&M costs in year 1...

A machine cost $30,000 initially and has no salvage value. The O&M costs in year 1 were $10,000 and have been increasing by $2,000 from year 2. The minimum cost life of this machine for a MARR of 10 %. (show your solution)

A. 4 years

B. 2 years

C. 6 years

D. None of above

Expert Solution

C 6 years

Year	Initial cost	O&M	1	2	3	4	5	6
0	-30000		-30000	-30000	-30000	-30000	-30000	-30000
1		-10000	-10000	-10000	-10000	-10000	-10000	-10000
2		-12000		-12000	-12000	-12000	-12000	-12000
3		-14000			-14000	-14000	-14000	-14000
4		-16000				-16000	-16000	-16000
5		-18000					-18000	-18000
6		-20000						-20000

		NPV	-39090.91	-49008.26	-59526.67	-70454.89	-81631.47	-92920.95
		EUAC	$43,000.00	$28,238.10	$23,936.56	$22,226.46	$21,534.18	$21,335.34

FORMULAE

jeff jeffy answered 6 months ago

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