Under consideration for replacement

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Reference no: EM132010912

Assume the MARR is 10% per year for this analysis. A presently owned machine that was purchased eight years ago for $450,000 is under consideration for replacement. It has an annual operating cost of $120,000 per year and a salvage value of $40,000 whenever it is replaced. The challenger has a first cost of $670,000, an expected annual operating cost of $94,000, and a salvage value of $60,000 after its 10-year economic life. The breakeven market value of the presently owned machine required to make the AW values of the two machines the same, if the presently owned machine is kept for five more years and then replaced with the challenger that has the same AW, is closest to.

Reference no: EM132010912

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