Question

An injection molding system has a first cost of $150,000 and an annual operating cost of $65,000 in years 1 and 2, increasing by $3,000 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 8% per year, determine the ESL and the respective AW value of the system.

The ESL is ____ year(s) and AW value of the system is $ ____

Answer 1

MARR = 8%

Using excel

Year	Discount factor	O&M cost	PV (O&M)	Cumulative (O&M)	Cumulative (O&M) + Initial Cost	Salvage value	PV (Salvage value)	NPV	(A/P,8%,n)	EUAC
A	B	C	D=C*B	E	F=E+150000	G	H=G*B	I=F-H	J	K = I*J
1	0.92593	65000.00	60185.19	60185.19	210185.19	37500.00	34722.22	175462.96	1.08000	189500.00
2	0.85734	65000.00	55727.02	115912.21	265912.21	37500.00	32150.21	233762.00	0.56077	131086.54
3	0.79383	68000.00	53980.59	169892.80	319892.80	37500.00	29768.71	290124.09	0.38803	112577.87
4	0.73503	71000.00	52187.12	222079.92	372079.92	37500.00	27563.62	344516.30	0.30192	104016.64
5	0.68058	74000.00	50363.16	272443.08	422443.08	37500.00	25521.87	396921.21	0.25046	99411.48
Discount factor	1/(1+0.08)^n
(A/P,i,n)	i((1 + i)^n)/((1 + i)^n-1)

Economic service life is 5 years and AW is -99411.48