Question
In: Finance
An injection molding system has a first cost of $190,000 and an annual operating cost of...
An injection molding system has a first cost of $190,000 and an annual operating cost of $71,000 in years 1 and 2, increasing by $6,000 per year thereafter. The salvage value of the system is 25% of the first cost regardless of when the system is retired within its maximum useful life of 5 years. Using a MARR of 10% per year, determine the ESL and the respective AW value of the system.
The ESL is 5 year(s) and AW value of the system is $ .
Solutions
Expert Solution
| Year | O&M Cost | Cost | PVF at 10% | PV | Cumlative PV | Market Value | Market Value PW | PW = Cumulative PV + Market value PW | PVAF at 10% | EUAC |
| A | B | C | D =A*C or B*C | E | F = C*E | G | H | G÷H | ||
| 0 | ($190,000) | 1.00 | (190,000.00) | (190,000.00) | - | - | ||||
| 1 | -71000 | 0.90909091 | (64,545.45) | (254,545.45) | 47,500 | 43,181.82 | (211,364) | 0.909091 | (232,500) | |
| 2 | -71000 | 0.82644628 | (58,677.69) | (313,223.14) | 47,500 | 39,256.20 | (273,967) | 1.735537 | (157,857) | |
| 3 | -77000 | 0.7513148 | (57,851.24) | (371,074.38) | 47,500 | 35,687.45 | (335,387) | 2.486852 | (134,864) | |
| 4 | -83000 | 0.68301346 | (56,690.12) | (427,764.50) | 47,500 | 32,443.14 | (395,321) | 3.169865 | (124,712) | |
| 5 | -89000 | 0.62092132 | (55,262.00) | (483,026.49) | 47,500 | 29,493.76 | (453,533) | 3.790787 | (119,641) | |
| EUAC minimum = $119,641 | ||||||||||
| Economic life = 5 years | ||||||||||
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