Annual cost associated with the optimal economic life

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Reference no: EM132044425

Yupi Inc. is considering replacing a machine. These are the data for both the used and new machine.

Used machine: the machine was purchased for $17,130 one year ago, the current salvage value is $10073 and is expected to have a scrap value of $6734 whenever it is retired. This used machine still has 3 years left of service. From now on, the operating and Maintenance costs are $2383 for the first year and expected to increase by $1967 thereafter.

New Machine: machine costs $13491 and is expected to have a scrap value of $8983 whenever it is retired. Operating and Maintenance costs are $1475 for the first year and expected to increase by $1079 thereafter. The service life of this machine is 3 years.

If the MARR is 12%, determine the minimum equivalent uniform annual cost associated with the optimal economic life of the machine that offers the lowest EUAC.

Reference no: EM132044425

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