In: Economics
A machine costs $17053 and is expected to have a scrap value of $2171 whenever it is retired. Operating and Maintenance costs are $1517 for the first year and expected to increase by $1457 thereafter. If the MARR is 11%, determine the minimum equivalent uniform annual cost associated with the optimal economic life of the machine. The service life of this machine is 5 years. Note: round your answer to two decimal places, and do not include spaces, currency signs, plus or minus signs, nor commas.
MARR = 11%
Using Excel for Economic life analysis
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,11%,n) | EUAC |
A | B | C | D=C*B | E | F=E+17053 | G | H=G*B | I=F-H | J | K = I*J |
1 | 0.900901 | 1517.00 | 1366.67 | 1366.67 | 18419.67 | 2171.00 | 1955.86 | 16463.81 | 1.110000 | 18274.83 |
2 | 0.811622 | 2974.00 | 2413.77 | 3780.43 | 20833.43 | 2171.00 | 1762.03 | 19071.40 | 0.583934 | 11136.43 |
3 | 0.731191 | 4431.00 | 3239.91 | 7020.34 | 24073.34 | 2171.00 | 1587.42 | 22485.92 | 0.409213 | 9201.53 |
4 | 0.658731 | 5888.00 | 3878.61 | 10898.95 | 27951.95 | 2171.00 | 1430.10 | 26521.84 | 0.322326 | 8548.69 |
5 | 0.593451 | 7345.00 | 4358.90 | 15257.85 | 32310.85 | 2171.00 | 1288.38 | 31022.47 | 0.270570 | 8393.76 |
Discount factor | 1/(1+0.11)^n | |||||||||
(A/P,i,n) | i((1 + i)^n)/((1 + i)^n-1) |
Minimum EUAC = 8393.76 at 5 yrs
So economic service life is 5 yrs