What is the current market value for machine a

Reference no: EM131908617

Problem

Machine A was purchased 5 years ago for $90,000. Its operating cost is higher than expected, so it will be used for only 4 more years. Its operating cost for year 1 will be $15,000, increasing by $2000 per year through the end of its useful life. The challenger, machine B, will cost $150,000 with a $50,000 salvage value after its10-year life. Its operating cost is expected to be $10,000 for year 1 and then increasing by $1,000 every year from years 2 to 10. What is the current market value for machine A that would make the two machines equally attractive at an interest rate of 12% per year?

Reference no: EM131908617

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