Calculate the optimal replacement cycle for the machine

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Reference no: EM131510775

As a financial analyst at barclays, you are evaluating how often an equipment should be replaced. An equipment has a cost of $25,000. the annual maitenance costs of the equipment forecast as follows:

Cost

T= 0, $25,000

1 , 1000

2, 3000

3, 8000

4, 13000

5, 25000

The residua value can be ignored. The cost of capital of the company is 11% per year. calculate the optimal replacement cycle for the machine.

Reference no: EM131510775

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