In: Finance
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
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 |