Determine the optimum replacement cycle for compressors

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Reference no: EM131189872

The ACME Company is planning on purchasing a number of high grade compressors for operations. As part of the economic analysis performed, the economic replacement cycle for all equipment purchases used in operations required the determination of the optimum replacement cycle as part of the budgeting and planning process. The initial cost of the compressors is $10,000 per unit. The O&M costs are $2500 the first year and increase 10% per year thereafter, while the salvage value decreases 20% annually. The company utilized a BTMARR of 15%. Determine the optimum replacement cycle for these compressors.

Reference no: EM131189872

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