Determine the before-tax optimal replacement interval

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Reference no: EM131091993

Polaris Industries wishes to purchase a multiple-use-in-plant "road test" simulator that can be used for ATV's, motorcycles, and snowmobiles. The simulator takes digital data from relatively short drives on a desired surface and simulates the ride over and over while the vehicle is mounted to a test stand under load. It can run continuously if desired and provides opportunities to redesign areas of poor reliability. It costs $128,000, and its market value decreases by 30 percent each year. Operating costs are modest; however, maintenance costs can be significant due to the rugged use. O&M in the first year is expected to be $10,000, increasing by 25% each subsequent year. MARR is 9%. Determine the before-tax optimal replacement interval.

Reference no: EM131091993

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