Calculate the equivalent operational anual cost

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Reference no: EM131316205

An old machine have operated 10 years, but will continue operating for another 5 years. The cost of the machine was 30,000 with a residual value of 0. This machine could be sold in $12000 today but this offer depreciates $2400 per year. The anual operational cost are $5000, but each year increase for the amount of $1300. The cost of a new machine is $45000 with an estimated residual value of $5000 in the year 20th. The operational cost of the new machine is 3000 the first 10 years and 4000 the last ten years. The rate of return of capital is 12% and the contribution rate of 30%. Assume the depreciation is a constant deduction. a) Calculate the equivalent operational anual cost in the first year of the old machine. b) calculate the equivalent operational anual cost of the New machine during all its life(20 years).

Reference no: EM131316205

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