Question

In: Finance

A senior engineer at Company C has recommended the company to replace a 2-year-old measurement device...

A senior engineer at Company C has recommended the company to replace a 2-year-old measurement device immediately. He believes that it can be shown that the proposed equipment is economically advantageous at a 15% per year rate in a 5-year time span.

b. Determine the Economic Service Life (ESL) at interest of 10% per year for a machine that has a first cost of $100,000 with the data below Year AOC Market Value 1 -$1000 $7000 2 -$1200 $5000 3 -$1500 $4200 4 -$2000 $3000 5 -$3000 $2000

Solutions

Expert Solution

ESL is 5 years since EUAC is lowest at life of 5 years

Year/ESL 1 2 3 4 5
0 -100000 -100000 -100000 -100000 -100000
1 6000 -1000 -1000 -1000 -1000
2 3800 -1200 -1200 -1200
3 2700 -1500 -1500
4 1000 -2000
5 -2000
NPV -94545.45 -97768.60 -99872.28 -102344.79 -105635.67
EUAC $104,000.00 $56,333.33 $40,160.12 $32,286.79 $27,866.42


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