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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 $  .

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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

jeff jeffy answered 2 years ago
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