Calculate the eac of every cost component

Reference no: EM132038676

Question: A piece of machinery for a chemical plant costs $8,000 and has no salvage value after it is installed. The manufacturer's warranty will pay the first year's maintenance and repair costs and they will increase on a $900 arithmetic gradient in subsequent years. Also, operating expenses for the machinery will be $500 the first year and will increase on a $400 arithmetic gradient in the following years. If interest is 8%, compute the useful life of the machinery that minimizes the EAC. That is, find its minimum cost life. Explain your calculations.

{TIP: Calculate the EAC of every cost component for each considered lifespan using the Arithmetic Gradient Series factor, in order to find the minimum cost life-calculate the EAC up to year 7}

Reference no: EM132038676

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