Question

Milliken uses a digitally controlled dyer for placing intricate patterns on manufactured carpet squares for home and commercial use. It is purchased for $400,000. Its market value will be $310,000 at the end of the 1st year and drop by $46,000 per year thereafter to a minimum of $30,000. Operating costs are $20,000 the 1st year, increasing by 9% per year. Maintenance costs are only $8,000 the 1st year but will increase by 36% each year thereafter. Milliken’s MARR is 20%. Determine the optimum replacement interval for the dyer.

Answer 1